5 ms·

This [1] is my hideous destruction of the graphic (sorry) to overlay world population on the Internet with respect to time, data from some worldstats site[2]. I

by K2h 14y ago

This [1] is my hideous destruction of the graphic (sorry) to overlay world population on the Internet with respect to time, data from some worldstats site[2]. I propose that the proper size of a tech IPO should be normalized (and upper bounded) against the possible global reach, which I think the % of world population on the internet does a good job of showing. [1] http://i.imgur.com/HyeKf.gif http://i.imgur.com/HyeKf.gif [2] http://www.internetworldstats.com/emarketing.htm http://www.internetworldstats.com/emarketing.htm

guelo 14y ago
That is an interesting thought but China complicates things since a good chunck of new internet users are Chinese but Google and Facebook are blocked there.
geoffschmidt 14y ago
I wish I could think of a reasonable way to normalize for the age of the company. A decade ago, there was no SOX and it didn't suck as much to be a public company, and it wasn't as easy (?) to raise $100MM from DST as an alternative. Facebook delayed its IPO for as long as possible and went to the private capital markets instead of to the public. Its valuation should be compared with companies at a similar point in their lifecycle.
isalmon 14y ago
100% agree, it should also be normalized against the value of dollar.
hamidpalo 14y ago
Tech isn't only the internet. Microsoft and Apple both went public before the Internet and managed to do quite well without it. Correlation != causation. Might as well graph it against the number of World Cup or Euro championships in that year and get a much higher correlation since the IPOs seem to all be in an even year. It'd be much more interesting to look at perfomance vs sector and performance vs the index.
- lachenmayer 14y ago
  > Microsoft and Apple both went public before the Internet and managed to do quite well without it. That's because Apple's and Microsoft's products don't (or didn't at the time the companies went public) rely solely on the internet. A big reason why Facebook has such a massive valuation is precisely because the population of the internet has increased so strongly.
  - marcog1 14y ago
    Have you taken into account Facebook being the reason a lot of people joined the Internet?
    - elemeno 14y ago
      I would find that a hard claim to believe.
      - moreati 14y ago
        I find it plausible. For anything more I'd want evidence, but all I can offer is anecdote. In the UK over the last few years most Android/not-iPhone adverts I saw made it very clear that the phone did Facebook - implying to me that Facebook was a major driver for people buying a smartphone.
- K2h 14y ago
  You get my upvote for 'Correlation != causation'. I say that probably twice a week myself - i'm still looking for a way to solve for causation, when I figure it out, i'm heading to Vegas.
ChuckMcM 14y ago
This is an excellent insight. One really has to consider the total available market when valuing a business. The simple and intuitive example is if there is only one dog food store in Duluth Minnesota, population circa 87,000 it might have a value of $X, but if there is only one dogfood store in New York City, population circa 8.25 million then you would have to get the store in NY a higher valuation than the one in Duluth, based simply on the number of potential customers. That is one of the big differences between the dot.com bubble and today's valuations. In the 90's there were tons of people who only used their computers at work and didn't have one at home. That has flipped where lots have them at home and a large fraction have them in their pocket. So the valuation of a company that requires network access to be successful has to be proportionate to the network population.
efuquen 14y ago
You need to keep in mind advertising $$ for those internet users as well. As someone mentioned, China is a huge factor and Facebook isn't available. And the vast majority of advertising revenue a company like Facebook would make most certainly comes from the US and Europe, which is pretty saturated with internet users already. South America, Africa, and Asia are all going to be much harder to monetize on.

by K2h 14y ago

guelo 14y ago

That is an interesting thought but China complicates things since a good chunck of new internet users are Chinese but Google and Facebook are blocked there.

geoffschmidt 14y ago

I wish I could think of a reasonable way to normalize for the age of the company. A decade ago, there was no SOX and it didn't suck as much to be a public company, and it wasn't as easy (?) to raise $100MM from DST as an alternative. Facebook delayed its IPO for as long as possible and went to the private capital markets instead of to the public. Its valuation should be compared with companies at a similar point in their lifecycle.

isalmon 14y ago

100% agree, it should also be normalized against the value of dollar.

hamidpalo 14y ago

Tech isn't only the internet. Microsoft and Apple both went public before the Internet and managed to do quite well without it. Correlation != causation. Might as well graph it against the number of World Cup or Euro championships in that year and get a much higher correlation since the IPOs seem to all be in an even year. It'd be much more interesting to look at perfomance vs sector and performance vs the index.

lachenmayer 14y ago
> Microsoft and Apple both went public before the Internet and managed to do quite well without it. That's because Apple's and Microsoft's products don't (or didn't at the time the companies went public) rely solely on the internet. A big reason why Facebook has such a massive valuation is precisely because the population of the internet has increased so strongly.
- marcog1 14y ago
  Have you taken into account Facebook being the reason a lot of people joined the Internet?
  - elemeno 14y ago
    I would find that a hard claim to believe.
    - moreati 14y ago
      I find it plausible. For anything more I'd want evidence, but all I can offer is anecdote. In the UK over the last few years most Android/not-iPhone adverts I saw made it very clear that the phone did Facebook - implying to me that Facebook was a major driver for people buying a smartphone.
K2h 14y ago
You get my upvote for 'Correlation != causation'. I say that probably twice a week myself - i'm still looking for a way to solve for causation, when I figure it out, i'm heading to Vegas.

ChuckMcM 14y ago

This is an excellent insight. One really has to consider the total available market when valuing a business. The simple and intuitive example is if there is only one dog food store in Duluth Minnesota, population circa 87,000 it might have a value of $X, but if there is only one dogfood store in New York City, population circa 8.25 million then you would have to get the store in NY a higher valuation than the one in Duluth, based simply on the number of potential customers. That is one of the big differences between the dot.com bubble and today's valuations. In the 90's there were tons of people who only used their computers at work and didn't have one at home. That has flipped where lots have them at home and a large fraction have them in their pocket. So the valuation of a company that requires network access to be successful has to be proportionate to the network population.

efuquen 14y ago

You need to keep in mind advertising $$ for those internet users as well. As someone mentioned, China is a huge factor and Facebook isn't available. And the vast majority of advertising revenue a company like Facebook would make most certainly comes from the US and Europe, which is pretty saturated with internet users already. South America, Africa, and Asia are all going to be much harder to monetize on.