Social networking scored another homerun this morning, with business networking site LinkedIn securing $53 million in funding. Four venture capital firms joined in on the deal, gaining a 5% stake of the site, which helps business users connect with other professionals.

Here's the real news, though: LinkedIn's investors have valued the company at a whopping $1 billion, one of the highest valuations for a website of its ilk since Microsoft plunked down $240 million for a 1.6% stake in Facebook. During that deal, Microsoft assigned Facebook a $15 billion value, topping the price of highly popular social site MySpace, which sold to the Rupert Murdoch's News Corporation for $580 million in 2005. Interestingly enough, LinkedIn doesn't even have a user base close to that of MySpace or Facebook (see table below).

Nonetheless, by slapping a $1 billion pricetag on LinkedIn and other sites, it's clear that venture capital has high hopes for social networking. But are they being overly optimistic? As we've reported a myriad of times on this site, Web 2.0 businesses haven't been able to generate the kind of serious revenues that keep VCs happy so far. So what's with the massive valuations?

The hope is that at some point—and some point soon—advertisers and marketers are going to find a way to monetize these sites. Social networks like MySpace, Facebook, and LinkedIn have massive communities of users who share personal details about themselves—information that's highly coveted by marketers when crafting ads to catch their attention. In theory, then, these sites, along with their marketing gurus, should be able to slap together targeted advertisements that are highly-effective moneymakers. So far they haven't been able to do that—but LinkedIn's $1 billion valuation is like a massive wager by VCs that says that soon, someone will. Are they taking a big risk, or is it simply an inevitability that Silicon Valley will find a way to monetize Web 2.0 soon?

What do you think?

Image via The New York Times