One week after debuting, and then surging to more than $120 a share, LinkedIn (NYSE: LNKD) has become a bona fide stock market joke.

Don't believe me? Read the headlines. There, you'll find skeptics who ignore how LinkedIn has doubled from its IPO price of $45, and instead focus on the multiples -- 30 times trailing revenue and 135 times book value as of this writing -- in declaring a social media bubble that's overdue to pop.

"History has resoundingly shown that IPO-related euphoria rarely lasts longer than a few days. Some of the largest IPO gains in history were quickly wiped out in a matter of months," fellow Fool Sean Williams wrote in the wake of the LinkedIn spectacle.

Twitter CEO Dick Costolo can't be happy about any of this. His company either needs to go public now, while some euphoria remains, or wait years to work through the turmoil that's plagued his team. I'd bet on the latter.

Twitter's tough choice
Even so, exiting now could have its advantages. Earlier this month, Renren (NYSE: RENN), the supposed Facebook of China, gained 29% on its first day of trading. And on Tuesday, Russian search engine Yandex (Nasdaq: YNDX) debuted and soared 55%. If that isn't euphoria, I don't know what is.

Even so, it would also be folly to suggest the excitement will continue for much longer. Investors have already begun abandoning Renren for hotter issues. (The stock is down 32% since its May 4 debut.) Meanwhile, profitable tech small-timers such as Boingo Wireless (Nasdaq: WIFI) grow quietly by connecting consumers with wireless hotspots.

Twitter is more Renren than Boingo, unfortunately. Consider the parallels:

  • Neither company is profitable. Twitter's Costolo said as much during a late summer 2010 interview with CNN. Renren reported a $64 million net loss last year, despite a 64% increase in revenue.
  • Both attract huge amounts of Web traffic. According to data compiled by Web tracker, Twitter is the world's 9th most trafficked site, while Renren ranks 87th. Combined, they handle close to 100 million tweets and status updates daily.
  • Both suffer from management issues and related turmoil. Twitter reportedly suffers from overspending, indecision, and management infighting. Renren lost the leader of its board's audit committee when allegations of accounting irregularities surfaced days before its IPO.

The upside of hysteria
Which brings us back to LinkedIn. For all the bubble talk and other hoo-ha surrounding its IPO, the debut of this business-oriented social network has forced investors to think about the true value of social media.

I think they've concluded two things that make this euphoria very different from the euphoria of the late 90s. First, they're segmenting. LinkedIn (profitable and growing) is rising as Renren (unprofitable and tainted by scandal) is falling. The message: Expensive is OK, but troubled isn't.

Second, they're concentrating. Boingo, a good business, received virtually no interest from IPO investors. Their appetite's confined to social media alone, which, as my fellow Fool analyst Eric Bleeker points out here, creates a nice opportunity for the rest of us who follow the broader tech sector.

More deals on the way
No one knows when the silly season for social media valuations will end, but there seems to be enough scrutiny here to suggest that only a handful of truly awful ideas will find their way to the public markets. Instead, we'll see the likes of Facebook and Zynga debut. While they may be expensive, these businesses are breaking long-standing rules of the advertising and video game industries, and unlocking billions in new value as a result.

Twitter doesn't yet fit this description. Until it does, Costolo's best bet is to work with co-founders Biz Stone and Jack Dorsey to draw up a plan that draws in cash flow. That's what investors want. It's why you see so much money flowing into cloud computing, where the dominant players are raking in moola by reshaping the way we consume software.

Intrigued? Click here to watch a free video that examines the likely winners in the cloud, including one company that's already been a multibagger winner for our Motley Fool Rule Breakers service, yet still has room to run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.