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To be fair, the whole thing could still prove to be the mother of all bubbles. For one: we still don't really really understand network effects. There's huge v

To be fair, the whole thing could still prove to be the mother of all bubbles. For one: we still don't really really understand network effects. There's huge value to being Facebook (you're forced to be there because all your friends are there and most nowhere else), but people also switch platforms for reasons that are not excellently understood. And when I say bubble I don't mean this or that company -- Silly Valley big money is basically all bet on network effects. (I.e. Instagram is worth $100B under the premise that I can't build an Instagram killer (that actually kills it) in a short period of time. And jeez, it's not fundamentally different from Geocities + Frontpage, just has better UX)

xkjkls 8y ago
It also depends on your investment timeline here. Facebook and other social media properties have historically traded at super low multiples compared to other companies with similar growth/profits. Facebook is trading at 15x it's projected 2020 earnings. That's extraordinarily low compared to any other tech giant. I'd say the risks of one-day being usurped are already substantially factored in.
- thanatropism 8y ago
  This is actually an excellent point, thanks for bringing it to my attention.
austenallred 8y ago
I mean I spend $100,000/month advertising on Facebook and Instagram, so it depends on what your definition of “bubble” is
- mac01021 8y ago
  What kind of product/service are you selling? Have you seen much indication that that has been money well spent?
  - austenallred 8y ago
    Yes, the ROI is positive for us, as it is for most advertisers that continually dump in big budget dollars. It’s easy to measure that stuff.
  - skinnymuch 8y ago
    I run ecommerce right now on them in a similar amount. Before I’d run different affiliate offers through them. Though back then for those, Instagram wasn’t that big. Might start again if the opportunity works out. The returns are good or it would be crazy to put that much money into the ads.
skinnymuch 8y ago
I have to echo austenallred. Depending on the month, I’ll spend a similar amount on Facebook and Instagram ads and get good results from them. Instagram‘s ad platform and revenue keep growing at a crazy pace too. They are also the only two social networks I advertise on.
- thanatropism 8y ago
  That's not the point, though. The point is that due to network effects (which lock users in to a platform), ads are monopoly-priced. But network effects are not super well understood and platform collapses do happen. So we know the ads market to be large -- or at least people on HN are testifying to that effect, but we don't know that Facebook or MySpace or Lycos get to appropriate it to a long enough period of time that current valuations make sense on a no-bullshit NPV basis. A fair point was made elsewhere that multiples (which are more or less like stock market folklore, but still allow for comparison across multiple industries) in these companies are relatively modest.

xkjkls 8y ago

It also depends on your investment timeline here. Facebook and other social media properties have historically traded at super low multiples compared to other companies with similar growth/profits. Facebook is trading at 15x it's projected 2020 earnings. That's extraordinarily low compared to any other tech giant. I'd say the risks of one-day being usurped are already substantially factored in.

thanatropism 8y ago
This is actually an excellent point, thanks for bringing it to my attention.

austenallred 8y ago

I mean I spend $100,000/month advertising on Facebook and Instagram, so it depends on what your definition of “bubble” is

mac01021 8y ago
What kind of product/service are you selling? Have you seen much indication that that has been money well spent?
- austenallred 8y ago
  Yes, the ROI is positive for us, as it is for most advertisers that continually dump in big budget dollars. It’s easy to measure that stuff.
- skinnymuch 8y ago
  I run ecommerce right now on them in a similar amount. Before I’d run different affiliate offers through them. Though back then for those, Instagram wasn’t that big. Might start again if the opportunity works out. The returns are good or it would be crazy to put that much money into the ads.

skinnymuch 8y ago

I have to echo austenallred. Depending on the month, I’ll spend a similar amount on Facebook and Instagram ads and get good results from them. Instagram‘s ad platform and revenue keep growing at a crazy pace too. They are also the only two social networks I advertise on.

thanatropism 8y ago
That's not the point, though. The point is that due to network effects (which lock users in to a platform), ads are monopoly-priced. But network effects are not super well understood and platform collapses do happen. So we know the ads market to be large -- or at least people on HN are testifying to that effect, but we don't know that Facebook or MySpace or Lycos get to appropriate it to a long enough period of time that current valuations make sense on a no-bullshit NPV basis. A fair point was made elsewhere that multiples (which are more or less like stock market folklore, but still allow for comparison across multiple industries) in these companies are relatively modest.