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Comparing the acquisitions of two companies in different industries fallaciously assumes there is an objective measure of the "value" of a company. Acquisition
by reso 14y ago
Comparing the acquisitions of two companies in different industries fallaciously assumes there is an objective measure of the "value" of a company.
Acquisition value != societal value.
Instagram wasn't worth $1 billion to society, it was worth $1 billion to Facebook, which works out to $30/user. Facebook can reliably turn users into gold, therefore it was a reasonable purchase for them.
- levifig 14y agoAgree. That's the definition of a "acquisition bubble": when acquisition value is so far higher than societal value. For the record: I'm not disagreeing with you. Putting things like this in perspective just makes one wonder what has led us here… :)
- jerf 14y ago"Societal value" is a veeerrrry loaded term here, to the point that trying to argue from it verges on tautology. Who are you to decide what the "value" to society of a large company is? Besides, usually when people are flinging around that ill-defined loaded term, they're comparing something like a farmer to a social media platform, where one provides obvious concrete value and the other is providing value much higher up the Maslow hierarchy. But here we're talking about two entertainment companies, one built on two-way communication and one built on the older one-way consumption model, that peculiarly 20th-century aberration. Is it really so obvious that the valuations are that wrong? I'm totally unconvinced it is so obvious that it goes without saying.
- jansen 14y agoSecond that. This is a horrible comparison. Not only can Facebook turn users into gold, Instagram was the first real threat to build a social network that could turn into a threat for Facebook. Both Facebook and Instagram started off by making photos social, extremely successful.
- notatoad 14y agoIsn't that exactly the author's point: acquisition value of trendy tech companies is wildly disparate from societal value, and that disparity is not healthy or sustainable.
- bduerst 14y agoThey're missing the point, and reso hit the nail on the head. It's analagous to someone saying, "Academic researchers should be paid more because of what they're progressing mankind". But they're typically not paid more than those working in a for-profit organization who is also doing research. Instagram was worth that sum to Facebook, just as Lucasarts is worth that sum to Disney. Neither are worth that much for society, though Lucasarts happen to contribute more to society over it's 40 years of existence.
- 001sky 14y agono, this argument is weak. all kinds of implicit assumptions about markets and valuations. markets can be massively innefficient when dimensionalized by (for example) any other variable than information. eg. volatility. but vol has massive market value itself (see: black scholes). subject to massive externality (see: political economy). Regardless, asset bubbles are economically and politically problematic.
- stevewillows 14y agoYou just made Zuck sound like Gargamel and the users like Smurfs. Facebook said it themselves, it's less about '$1bn' and more about '1%'.
- hasenj 14y agoWeren't most of these users on Facebook to begin with?