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This talk of "echoes of 2000" annoys me. I see this as the market acting reasonably rationally actually. Facebook shares are off ~40% from their IPO because th
by cletus 14y ago
This talk of "echoes of 2000" annoys me.
I see this as the market acting reasonably rationally actually. Facebook shares are off ~40% from their IPO because they were overvalued. They gained valuation in a hype bubble on secondary markets with limited volume between a small set of players. Once exposed to greater liquidity, easier price discovery and a wider market, the share price has headed towards something I would consider more realistic.
The risks for Facebook are enormous. Apple and Google (disclaimer: I work for Google in display advertising) are far more established and have a much broader product offering than Facebook across the Web, mobile and other areas. They are both profitable and can sustain a long drawn out campaign.
Facebook is reliant on social-gaming income (which is increasingly going mobile and out of Facebook's ecosystem to Apple's and Google's) and what amounts to display advertising, where they are competing with Google's Doubleclick offerings.
The price paid for Instagram is a clear warning sign on the risks to Facebook, that a company of 13 years in 2 years can become what amounts to an existential threat to Facebook should concern any Facebook investor.
I also stand by my (many) previous statements that I think the utility and value of "social search" is far more limited than it's hyped up to be.
But whatever the case, these are real companies with real revenues. This is nothing like 2000.
- andrewfelix 14y agoI agree that it's more that the chosen examples are examples of overblown IPO valuations. Pretty shocking graph though: http://www.nytimes.com/imagepages/2012/07/28/technology/28facebook-chart.html http://www.nytimes.com/imagepages/2012/07/28/technology/28fa...
- mtrimpe 14y agoZynga and GroupOn look bad there and they should as most people agreed they were never solid foundational businesses to start with. If you take Zynga and GroupOn out of the graph though, the Facebook stock could just as well be on a slightly jittery ride to approaching an equilibrium.
- ChuckMcM 14y agoI'm with you on this one, I lived through 2000 and I can tell you that this is no 2000. The folks managing the IPO all have egg on their faces, but nobody's trust fund got destroyed, no mass layoffs, no VC suicides, none of the "Hey the music stopped oh shit I'm still long on X, Y, or Z" Facebook brought in over a BILLION dollars last quarter. They "lost" money because they are doing the 'count stock options as an expense' thing that was foisted on Tech companies post bubble. But they actually 'earned' a quarter billion dollars. Compare that to any number of companies that never earned a dime from founding, through IPO, through ignominious death. Sheesh. One of the thing that is going to bite both Google and Facebook are some of the insane salaries they signed up for to keep people at one place or the other or to switch. Those are great engineers but most of them are never going to have a lifetime value of millions, even if they commit 20 years of their life to the company. That is a correction I don't look forward too, conversations like "Excuse me? You were thinking maybe $280K to start and an annual bonus plan? Uh Next!"
- meric 14y agoOf course you count stock options as an expense. If the event results in a loss of value for existing investors isn't called a loss what should it be called?
- ahi 14y agoRight. If it wasn't stock options it would be salary.
- ChuckMcM 14y agoThis is a troll obviously but for those of you too young to remember, this link captures most of the debate: http://www.nysscpa.org/cpajournal/2005/1105/essentials/p38.htm http://www.nysscpa.org/cpajournal/2005/1105/essentials/p38.h... From that page is this quote: "David Zion, an analyst at Bear, Stearns & Co., estimated that S&P 500 companies would have reported an average of 9% less earnings in 2000 if options had been expensed on the income statement. For tech companies, this reduction would have been even greater; for some, profits would have turned to losses." Which is the case for Facebook (profits turning to losses).