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I wish I had more upvotes for this comment. Its crazy to me how many people want to cry bubble 2.0 when all of these companies are turning good profits. The do

by wh-uws 16y ago

I wish I had more upvotes for this comment. Its crazy to me how many people want to cry bubble 2.0 when all of these companies are turning good profits. The dotcom bubble was all about people throwing a bunch of money at companies that had no clear or proven plan of success

Silhouette 16y ago
> Its crazy to me how many people want to cry bubble 2.0 when all of these companies are turning good profits. Most of them aren't turning good profits, relative to the valuations they have been receiving. The recent valuations for businesses like Facebook would take lifetimes to repay the cost of shares based on their profits today. The valuations only make any sense if you assume that these companies are going to experience very rapid growth rates in the near future. A lot of us who are thinking "bubble" just don't buy the hype about that growth. Social networking sites have come and gone. Search engines have come and gone. Technology platforms have come and gone. So far, I see no reason to believe that the likes of Facebook or Zynga or Groupon will be immune to disruptive competition and find new markets or business models sufficient to sustain dramatic growth for several years, which is what it would take as a minimum to make the valuations realistic. > The dotcom bubble was all about people throwing a bunch of money at companies that had no clear or proven plan of success And what is different here? Amazon has a market cap around $80B and a very high P/E by most standards at 75ish, but it has a solid business model (actually, more than one these days) and a strong brand that has stood the test of time for more than 15 years now. Next to that, does $50B for a social network that reportedly makes only ~$100M per year seem like a good investment? They've had 7 years to monetize their system and they've got 500M users; how long should we wait for the astronomical profits, exactly? Another example: for $5.5B, you could supposedly buy Zynga according to a recent evaluation. Or, you could buy about 10% of Tesco (the UK food store juggernaut).

by wh-uws 16y ago

Silhouette 16y ago

> Its crazy to me how many people want to cry bubble 2.0 when all of these companies are turning good profits. Most of them aren't turning good profits, relative to the valuations they have been receiving. The recent valuations for businesses like Facebook would take lifetimes to repay the cost of shares based on their profits today. The valuations only make any sense if you assume that these companies are going to experience very rapid growth rates in the near future. A lot of us who are thinking "bubble" just don't buy the hype about that growth. Social networking sites have come and gone. Search engines have come and gone. Technology platforms have come and gone. So far, I see no reason to believe that the likes of Facebook or Zynga or Groupon will be immune to disruptive competition and find new markets or business models sufficient to sustain dramatic growth for several years, which is what it would take as a minimum to make the valuations realistic. > The dotcom bubble was all about people throwing a bunch of money at companies that had no clear or proven plan of success And what is different here? Amazon has a market cap around $80B and a very high P/E by most standards at 75ish, but it has a solid business model (actually, more than one these days) and a strong brand that has stood the test of time for more than 15 years now. Next to that, does $50B for a social network that reportedly makes only ~$100M per year seem like a good investment? They've had 7 years to monetize their system and they've got 500M users; how long should we wait for the astronomical profits, exactly? Another example: for $5.5B, you could supposedly buy Zynga according to a recent evaluation. Or, you could buy about 10% of Tesco (the UK food store juggernaut).