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It seems, we are seeing the repetition of the first tech bubble when it comes to overblown valuations. Those valuations aren't really on realistic future earnin

by ulfw 12y ago

It seems, we are seeing the repetition of the first tech bubble when it comes to overblown valuations. Those valuations aren't really on realistic future earning potentials anymore. They rather are on future expected selling price. The idea being that 'I buy something for 10 times as much as it is worth, in hopes that I find someone who will pay me 20 times as much as it is worth' etc. Obviously that can't go on forever and the bubble burst might be as dangerous and devastating as the first one, unless valuations magically cool down.

thenmar 12y ago
But we aren't seeing anywhere near the same number of tech IPOs today as we were in 1998-2000. As I understand it, the "bubble" came from companies too easily selling their shares to ignorant, every day consumers who assumed "internet" meant the company would be huge. The only people investing in the companies you think are overvalued are VC firms with huge amounts of capital. Now, are these VCs providing the same amount of capital that the IPOs of 1998-2000 were? Hopefully someone with more insight can comment on this, but intuitively it seems to me that the burst couldn't possibly be as bad, since there's just less easily available money to suddenly dry up.
- ulfw 12y ago
  Very true. The IPO market has almost dried up (at least compared to back then). But the M&A market has almost replaced that. See Facebook's $19,000,000,000 acquisition of Whatsapp. It's a little like the housing bubble. As long as I find someone who'd pay me even more than I bought something for, everything goes well and dandy and no one asks about the real value of a product/house/company.
panarky 12y ago
Just because it's expensive doesn't mean it's a bubble. Remember the outrage at Instagram's billion-dollar valuation? Looks pretty cheap now. Same thing with Facebook, Netflix, Uber. Snapchat's simple idea is every bit as transformative as the simple ideas behind these companies. Here's what smartypants bubble-callers were saying in 2004 about Google before their $2.7 billion IPO[0], also built on a pretty simple but world-changing idea: "Pent-up demand for hot tech stocks is driving Googlemania." "There are serious questions about Google's long-term viability" "Word has it that Microsoft will feature an immensely powerful search engine in the next generation of Windows, due out by 2006." "Taking down Google with better search is in [Microsoft's] strike zone." "Google stands a good chance of becoming not the next Microsoft, but the next Netscape." "It's tough to see why many Windows users would even bother with Google." "Yahoo! has the advantage of being able to cull demographic data from its millions of subscribers and match them with advertisers." "Google relies on ads for 96 percent of its revenue making it a one-trick pony vulnerable to the swings of the market." Any of this sound familiar? [0] http://www.newrepublic.com/article/politics/bubble-bath http://www.newrepublic.com/article/politics/bubble-bath
- ulfw 12y ago
  Google had a monetization model by then and their IPO was a quarter of snapchats valuation. So where is snapchat's four times as good monetization model?
- nilkn 12y ago
  You're not really making me feel any better about this. Google's IPO was only 2.7 times the purchase price of Instagram? Even more, Google's IPO was a fourth of the current valuation of Snapchat? Those numbers don't feel right to me. Google also was actually profitable at the time of its IPO. It had a real business model.

by ulfw 12y ago

thenmar 12y ago

But we aren't seeing anywhere near the same number of tech IPOs today as we were in 1998-2000. As I understand it, the "bubble" came from companies too easily selling their shares to ignorant, every day consumers who assumed "internet" meant the company would be huge. The only people investing in the companies you think are overvalued are VC firms with huge amounts of capital. Now, are these VCs providing the same amount of capital that the IPOs of 1998-2000 were? Hopefully someone with more insight can comment on this, but intuitively it seems to me that the burst couldn't possibly be as bad, since there's just less easily available money to suddenly dry up.

ulfw 12y ago
Very true. The IPO market has almost dried up (at least compared to back then). But the M&A market has almost replaced that. See Facebook's $19,000,000,000 acquisition of Whatsapp. It's a little like the housing bubble. As long as I find someone who'd pay me even more than I bought something for, everything goes well and dandy and no one asks about the real value of a product/house/company.

panarky 12y ago

Just because it's expensive doesn't mean it's a bubble. Remember the outrage at Instagram's billion-dollar valuation? Looks pretty cheap now. Same thing with Facebook, Netflix, Uber. Snapchat's simple idea is every bit as transformative as the simple ideas behind these companies. Here's what smartypants bubble-callers were saying in 2004 about Google before their $2.7 billion IPO[0], also built on a pretty simple but world-changing idea: "Pent-up demand for hot tech stocks is driving Googlemania." "There are serious questions about Google's long-term viability" "Word has it that Microsoft will feature an immensely powerful search engine in the next generation of Windows, due out by 2006." "Taking down Google with better search is in [Microsoft's] strike zone." "Google stands a good chance of becoming not the next Microsoft, but the next Netscape." "It's tough to see why many Windows users would even bother with Google." "Yahoo! has the advantage of being able to cull demographic data from its millions of subscribers and match them with advertisers." "Google relies on ads for 96 percent of its revenue making it a one-trick pony vulnerable to the swings of the market." Any of this sound familiar? [0] http://www.newrepublic.com/article/politics/bubble-bath http://www.newrepublic.com/article/politics/bubble-bath

ulfw 12y ago
Google had a monetization model by then and their IPO was a quarter of snapchats valuation. So where is snapchat's four times as good monetization model?
nilkn 12y ago
You're not really making me feel any better about this. Google's IPO was only 2.7 times the purchase price of Instagram? Even more, Google's IPO was a fourth of the current valuation of Snapchat? Those numbers don't feel right to me. Google also was actually profitable at the time of its IPO. It had a real business model.