4 ms·

Is it a bubble? It matters if we think it is.

27 points by davewiner 16y ago

jdp23 16y ago
Well said. From a strategy perspective, if there's a bubble and it pops soon, a lot of companies will discover that some of their core assumptions no longer apply. Seems like a great time to be a contrarian.
klochner 16y ago
"didn't cut corners and are using servers they control" That seems a little out of place. If a lot of companies fold, demand for compute resources would go down, putting downward pressure on pricing. And the "free" web services are functioning more as a business prototyping tool than as a long term infrastructure strategy. Finally, no one hosts their servers at facebook, so it feels like the op is conflating a few concepts and weakening whatever point he was trying to make.
- HerraBRE 16y ago
  There is a difference between basing your business on commodity offerings (say, Linux vservers) where there is active competition, and basing your business on a walled garden of harder to replace services (say, Appengine, or S3, or Twitter or Facebook). Appengine is hard to replace, but there are some immature alternatives out there. Same for S3. If you rely on Twitter or Facebook, you are completely locked in. His point is, the more proprietary the stack you rely on, the more likely you are to get the thumbscrews when people start more aggressively monetizing - or the more likely you are to lose everything if the tech you are building on disappears or locks you out.
  - deleted 16y ago
    [deleted]
- davewiner 16y ago
  Heh it seems out of place cause you quoted it out of context. Sometimes it's so easy to debug these things. :-)
  - klochner 16y ago
    Hey dave - Didn't mean to take it out of context, definitely a mis-reading on my end. To be fair, "servers you control" is a little tangential to the real issue, which is an open ecosystem, and "cutting corners" doesn't really work with that metaphor.
spencerfry 16y ago
I like his point that it's the young entrepreneurs and their employees who will be most affected. Massive revenue generating companies such as Facebook, Zynga, Groupon etc., will weather the storm but that won't be the case for smaller companies that are doing little to no revenue generating.
- jdp23 16y ago
  It's more that the risks are different for the massive revenue-generating companies. In a situation were everybody agrees it's a bubble, Facebook, Zynga, Groupon etc. will be under huge pressure to generate more revenues to justify their valuations. If they fall short, their value could plunge; conversely, they might also overreact and make tradeoffs favoring short-term revenue that come back to bite them. So yes, they're in a waaaaaay better position than Webvan and CarsDirect were in ten years ago; but the risks are still significant.
j_baker 16y ago
The logic behind this posting (or lack thereof) makes my head hurt. 1. If people who say no do so with hesitation, but people who say yes do so without, why would you jump to the conclusion that there's a bubble? I know it may be a stretch, but perhaps the people who say no are hesitating because they put more thought into saying no than the people who say yes? 2. The article seems to be saying "Are we in a bubble? All I know is that when people stop saying we're not in a bubble, it will have popped." Of course, the article takes for granted that we're in a bubble when in fact we clearly aren't. Bubble's are just as much psychological as they are economic. If you can see a bubble happening, then it will cease to be a bubble. Seriously, we haven't even recovered from the last economic disaster. How about we do that before we start worrying about the next one?
- Psyonic 16y ago
  "If you can see a bubble happening, then it will cease to be a bubble." This statement is over-simplified. Let's talk real-estate speculation for a minute. You could be aware that the price you're paying for some property is over-valued, but still take the gamble because you think you'll be able to dump it before the bubble pops. Once awareness reaches a critical mass it may cease to be a bubble, but that doesn't happen overnight.

27 points by davewiner 16y ago

jdp23 16y ago

Well said. From a strategy perspective, if there's a bubble and it pops soon, a lot of companies will discover that some of their core assumptions no longer apply. Seems like a great time to be a contrarian.

klochner 16y ago

"didn't cut corners and are using servers they control" That seems a little out of place. If a lot of companies fold, demand for compute resources would go down, putting downward pressure on pricing. And the "free" web services are functioning more as a business prototyping tool than as a long term infrastructure strategy. Finally, no one hosts their servers at facebook, so it feels like the op is conflating a few concepts and weakening whatever point he was trying to make.

HerraBRE 16y ago
There is a difference between basing your business on commodity offerings (say, Linux vservers) where there is active competition, and basing your business on a walled garden of harder to replace services (say, Appengine, or S3, or Twitter or Facebook). Appengine is hard to replace, but there are some immature alternatives out there. Same for S3. If you rely on Twitter or Facebook, you are completely locked in. His point is, the more proprietary the stack you rely on, the more likely you are to get the thumbscrews when people start more aggressively monetizing - or the more likely you are to lose everything if the tech you are building on disappears or locks you out.
- deleted 16y ago
  [deleted]
davewiner 16y ago
Heh it seems out of place cause you quoted it out of context. Sometimes it's so easy to debug these things. :-)
- klochner 16y ago
  Hey dave - Didn't mean to take it out of context, definitely a mis-reading on my end. To be fair, "servers you control" is a little tangential to the real issue, which is an open ecosystem, and "cutting corners" doesn't really work with that metaphor.

spencerfry 16y ago

I like his point that it's the young entrepreneurs and their employees who will be most affected. Massive revenue generating companies such as Facebook, Zynga, Groupon etc., will weather the storm but that won't be the case for smaller companies that are doing little to no revenue generating.

jdp23 16y ago
It's more that the risks are different for the massive revenue-generating companies. In a situation were everybody agrees it's a bubble, Facebook, Zynga, Groupon etc. will be under huge pressure to generate more revenues to justify their valuations. If they fall short, their value could plunge; conversely, they might also overreact and make tradeoffs favoring short-term revenue that come back to bite them. So yes, they're in a waaaaaay better position than Webvan and CarsDirect were in ten years ago; but the risks are still significant.

j_baker 16y ago

The logic behind this posting (or lack thereof) makes my head hurt. 1. If people who say no do so with hesitation, but people who say yes do so without, why would you jump to the conclusion that there's a bubble? I know it may be a stretch, but perhaps the people who say no are hesitating because they put more thought into saying no than the people who say yes? 2. The article seems to be saying "Are we in a bubble? All I know is that when people stop saying we're not in a bubble, it will have popped." Of course, the article takes for granted that we're in a bubble when in fact we clearly aren't. Bubble's are just as much psychological as they are economic. If you can see a bubble happening, then it will cease to be a bubble. Seriously, we haven't even recovered from the last economic disaster. How about we do that before we start worrying about the next one?

Psyonic 16y ago
"If you can see a bubble happening, then it will cease to be a bubble." This statement is over-simplified. Let's talk real-estate speculation for a minute. You could be aware that the price you're paying for some property is over-valued, but still take the gamble because you think you'll be able to dump it before the bubble pops. Once awareness reaches a critical mass it may cease to be a bubble, but that doesn't happen overnight.