October 5, 2011.  The once-sizzling rise in the value of privately owned Facebook Inc. has slowed, a sign the social-networking service hasn’t been immune to broader market volatility or the weakness in the global economy.

Despite the cooling, Facebook next year still is expected to make one of the largest U.S. initial public offerings ever. For now, its stock is traded on secondary marketplaces where wealthy investors and institutions can purchase shares offered mostly by former employees.

Facebook share prices surged 70% to $34 in March from December, as reported in auctions by SharesPost Inc., a trading platform for stocks of privately owned companies. The growth since has leveled off, with shares trading at $35 or below. Facebook’s price has fallen 8% since July, to $32.10 in an auction held last week, valuing the entire company at roughly $77 billion.

Facebook isn’t alone, or even the worst hit of its brethren. Hot technology companies that have gone public in recent years also took hits in the market-wide downturn. The Standard & Poor’s 500-stock index has dropped 18% from its April peak, during which time the Nasdaq Stock Market Internet index has slid 23%.

Investors and analysts say the price of Facebook’s stock, owned by employees and outside investors, can’t easily be pinned down because trades take place on a variety of venues, some of which don’t reveal the prices. Also, valuations based on just a few buyers and sellers might not reflect how a company would be valued if millions of its shares were traded publicly.

Jim Friedland, who follows the Internet sector at Cowen & Co., says Facebook and competitor Google Inc. are susceptible to a slowdown in advertising spending if the economy slides into a recession. He and other analysts say there’s little sign of slippage in Facebook’s longer-term growth trajectory. Nor, he says, is the recent share-price weakness likely to affect the timing of Facebook’s IPO expected next year. Google, which went public in 2004 at a value of $23 billion, now is valued at about $161 billion.

But some analysts have lowered their projections for Facebook’s 2011 advertising revenue. EMarketer, which tracks Internet ad spending, has reduced its forecast of Facebook’s ad revenue by 6.1% from the start of the year to $3.8 billion. Facebook’s total first-half revenue doubled to $1.6 billion from a year earlier, according to a person familiar with the matter. EMarketer projects that Facebook still is on track to more than double its total revenue to $4.27 billion from $2 billion last year. In addition to advertising, Facebook collects revenue from the sales of virtual goods within social games.

Debra Aho Williamson, an eMarketer analyst, says some advertisers remain unpersuaded about the effectiveness of social networking as an ad medium. Some don’t feel the need to purchase Facebook ads because the marketers can use free fan pages instead, she says. Facebook has lost some short-term revenue as it has tweaked its ad placement and inventory, she says in an eMarketer report.

Facebook declined to comment. Estimates of the company’s current value range between $60 billion and $80 billion. The wide variation depends on which recent trade or per-share valuation is used, as well as the number of shares outstanding, which is estimated between 2.3 billion and 2.5 billion. “We’ve certainly seen a softening of the price over the
last couple of months,” says David Weir, chief executive of SharesPost. He attributes the decline to the recent market volatility, Google’s unveiling in late June of its Google+ service, and questions about whether Facebook will push back the timing of its IPO because of the broad market weakness.

Trades at SharesPost and other trading venues showed that Facebook stock surged in January on news that Goldman Sachs Group Inc. was making an investment that valued the company at $50 billion. Prices rose to about $30 a share in February and March from $20.85 in January, then peaked at $34 to $35 in August, according to Larry Albukerk, founder of EB Exchange Funds in San Francisco, who acts as a broker on private-market trades of companies that aren’t public. He saw trades as low as $31.50 last month.

Three mutual funds that have reported holding Facebook shares reported that the stock jumped at the end of last year and made more modest gains, if any, in the middle of this year. A Morgan Stanley Investment Management mutual fund, Multi Cap Growth Trust, first reported holding a Facebook stake valued at $13 a share as of Nov. 30. The same fund reported that the price soared 69% by the end of February. From there, it rose 14% to $25 by the end of June, the most-recent data available.

Fidelity Investments, which first reported holding Facebook shares valued at $25 on March 31, carried the shares at the same price on June 30. T. Rowe Price, which also valued its Facebook stock at $25 a share on March 31, said the shares rose to $28.34 apiece on June 30. Another fund, GSV Capital Inc., valued its Facebook shares at $29.28 each on June 30. Shares have slumped for other hot Internet companies that have held recent offerings. LinkedIn Corp., a business-networking site that went public in May, has fallen 31% since mid-July. Online music provider Pandora Media Inc., which went public in June, has fallen 38% since July 1. Google, whose stock price rose eightfold between
its IPO and its peak in 2008, has dropped 19% since late July.