5 ms·

I'm really sick of this Chicken-Little-the-sky-is-falling-I-want-to-have-published-the-"it-was-a-Bubble"-5-years-before-the-next-bubble type articles. Mashable

I'm really sick of this Chicken-Little-the-sky-is-falling-I-want-to-have-published-the-"it-was-a-Bubble"-5-years-before-the-next-bubble type articles. Mashable reported that Groupon had $800M in revenue last year when Google offered $6B for them. [1] Taking $1B in funding makes a bit more sense when you consider it's only 1 year's worth of revenue for them. LinkedIn is profitable before their IPO [2] Yelp made an estimated $50M last year, and if they play their daily deals program right, they have a chance to make a crap load more money. I'm wagering they are going to be quite profitable before they IPO. [3] Facebook make $1.8B in advertising revenue alone this year. I'd be hard pressed to believe they aren't profitable. And, since they have heaps of personal data on 1/12th of the world's population, does anyone doubt that Facebook's first 1,000 employees are going to be able to take up sewing blankets made of $100 dollar bills after their IPO? [4] Now, when growth oriented technology companies have significant revenue streams and/or are profitable, how exactly is it that we're in a bubble? Nothing to see here, folks. Go back to building companies that print money. ref: [1] http://mashable.com/2010/12/07/groupon-800-million/ http://mashable.com/2010/12/07/groupon-800-million/ [2] http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fc%2Fa%2F2011%2F01%2F29%2FBU581HDJ4N.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=%2Fc%2Fa%2F2011%... [3] http://www.businessinsider.com/yelps-first-daily-deal-beats-groupon-2010-9 http://www.businessinsider.com/yelps-first-daily-deal-beats-... [4] http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/01/18/businessinsider-facebook-isnt-growing-as-fast-as-google-did-in-its-early-days-2011-1.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/01/18/...

beoba 16y ago
Mashable's own article says the $800M is a "run rate" number. It's really Enron-style accounting: "Run rate is a tricky number, though. It’s a projection of what the company would make if you extrapolate from its most recent revenue numbers. Depending on the time frame used, the calculated annual run rate can vary significantly." If my income keeps growing at this rate, I'll be a trillionaire in no time!
- pchristensen 16y ago
  Run rate is about quantities, not rates. If you made $10 in Jan, $40 in July, and $160 in the next Jan, then your run rate would be $1920, (12 x $160), not projecting 4x growth per 6 months forward.
  - beoba 16y ago
    Using that math, I've already 'earned' many millions in my lifetime, even though I've only been out of college for a couple years. And that number gets even more exaggerated if I choose to base the calculation off a month where I got a bonus. My point stands; it's fabricated revenue.
    - pchristensen 16y ago
      It's a well understood and useful concept. Let's say you work at a job making $120K. Then in November, you start a new job paying $180K. Would you think that you make $130K (the amount you actually earned that year) or $180K (the amount you expect to make going forward)? Is the extra $50K fabricated salary? How else would you communicate fast growth in revenue? Also, since run rate is well understood, people don't use it for exceptional or one-time events like a bonus. For example, Groupon didn't claim to be raising money at $12B/yr since the big raise was a one-time event.
      - beoba 16y ago
        It doesn't communicate growth -- there is nothing to compare against. If you were going to do that, you'd simply provide a something like YOY% change in revenue. A run rate is just inflating/fabricating PAST revenue by speculating on the FUTURE. Refer to my helpful chart: | / <- SHOW THIS NUMBER TO INVESTORS, PRETEND IT WILL GO ON FOREVER | / |/ <- HIDE THIS NUMBER, TOO LOW +---
        tptacek 16y ago
        Wow, a handy ASCII chart that disproves the entire concept of investment. Congrats!
- D-mo 16y ago
  Mark-to-market accounting (Enron-style) is analogous to Groupon booking $3.5b in revenue in Q12011 because their valuation jumped from $2.5B to $6B this year--something they could never realize unless they sold, thus is null. Run rate is speculative, but far more rooted in reality.
pedalpete 16y ago
I didn't take Marks comments to be so much screaming 'BUBBLE' as they questioned the staying power of group buying. There wasn't a 'rollerskating' bubble, it had it's time and then people moved to other interests. I think that is what Mark was saying

beoba 16y ago

Mashable's own article says the $800M is a "run rate" number. It's really Enron-style accounting: "Run rate is a tricky number, though. It’s a projection of what the company would make if you extrapolate from its most recent revenue numbers. Depending on the time frame used, the calculated annual run rate can vary significantly." If my income keeps growing at this rate, I'll be a trillionaire in no time!

pchristensen 16y ago
Run rate is about quantities, not rates. If you made $10 in Jan, $40 in July, and $160 in the next Jan, then your run rate would be $1920, (12 x $160), not projecting 4x growth per 6 months forward.
- beoba 16y ago
  Using that math, I've already 'earned' many millions in my lifetime, even though I've only been out of college for a couple years. And that number gets even more exaggerated if I choose to base the calculation off a month where I got a bonus. My point stands; it's fabricated revenue.
  - pchristensen 16y ago
    It's a well understood and useful concept. Let's say you work at a job making $120K. Then in November, you start a new job paying $180K. Would you think that you make $130K (the amount you actually earned that year) or $180K (the amount you expect to make going forward)? Is the extra $50K fabricated salary? How else would you communicate fast growth in revenue? Also, since run rate is well understood, people don't use it for exceptional or one-time events like a bonus. For example, Groupon didn't claim to be raising money at $12B/yr since the big raise was a one-time event.
    - beoba 16y ago
      It doesn't communicate growth -- there is nothing to compare against. If you were going to do that, you'd simply provide a something like YOY% change in revenue. A run rate is just inflating/fabricating PAST revenue by speculating on the FUTURE. Refer to my helpful chart: | / <- SHOW THIS NUMBER TO INVESTORS, PRETEND IT WILL GO ON FOREVER | / |/ <- HIDE THIS NUMBER, TOO LOW +---
      - tptacek 16y ago
        Wow, a handy ASCII chart that disproves the entire concept of investment. Congrats!
D-mo 16y ago
Mark-to-market accounting (Enron-style) is analogous to Groupon booking $3.5b in revenue in Q12011 because their valuation jumped from $2.5B to $6B this year--something they could never realize unless they sold, thus is null. Run rate is speculative, but far more rooted in reality.

pedalpete 16y ago

I didn't take Marks comments to be so much screaming 'BUBBLE' as they questioned the staying power of group buying. There wasn't a 'rollerskating' bubble, it had it's time and then people moved to other interests. I think that is what Mark was saying