6 ms·

Does it seem like we're in another Internet bubble to anyone else?

by DougN7 12y ago

arfliw 12y ago
If we are, it should be called the Facebook Bubble. After their IPO when the stock lost half it's value, there was a severe market correction in VC as well. It got a lot harder to raise money. Now that the stock is up like 400% from its bottom, the money is flowing again. Want to know when the market will again correct? Just watch the price of FB. Or the new breed once they go public (Uber/Airbnb/Dropbox/Square etc).
- easytiger 12y ago
  The FB stock dive was largely emotional investing and happens every time when you get an IPO of a brand the general public identify with. I saw it hit about 19 and bought, even if a bit too timidly. I don't think you can read too much into that initial cock up RE facebook's value.
CmonDev 12y ago
I cannot see anything that costs $13 billion in that company. I am probably bad at pricing.
- rmsaksida 12y ago
  Same here. Aside from taking care of transactions, which is easy to imitate, I don't see what sets Airbnb apart from other vacation rental websites. They are not fundamentally different. Yes, they have a large userbase, but that's easily threatenable considering their fees and lack of distinction. I must be missing something.
  - troels 12y ago
    I think you severely underestimate how important it is to have a monopoly on the market. FB's main asset is also its userbase, so by that reasoning they are easy to emulate. It's not that people haven't tried that, but it doesn't work.
    - rmsaksida 12y ago
      Facebook is a free website, and it has massive technical advantages over all its competitors. It's integrated everywhere, the feature set is incredible, and it basically dictates our model of online social networks. Airbnb ultimately depends on how much renters, and indirectly seekers, are willing to pay. Its brand is not as well established as Facebook's (at least in my country). If a compelling alternative came up with lower fees, what would that mean to Airbnb? I'm not sold yet on its permanence.
      - mattmanser 12y ago
        The brand is well established, and outside the US too. Here in the UK Airbnb passes the random friend check, random non-techies know what it is and have used it. In fact I'm often surprised by the people that have.
  - icebraining 12y ago
    Doesn't that description fit eBay? Yet it has a $60B market cap.
  - smackfu 12y ago
    A website like this lives and dies on their inventory more then their userbase. AirBnB doesn't have a listing fee, which differentiated them from traditional vacation rental places like VRBO. How is a competitor going to get a competitive inventory?
    - anon1385 12y ago
      By being cheaper and by doing what AirBNB did - scrapping and spamming.
    - rokhayakebe 12y ago
      http://www.vrbo.com/info/list-your-property http://www.vrbo.com/info/list-your-property? I think their pricing is similar to ABB Also Homeway has a large inventory, I believe, but a lower market cap: 3B vs 10B.
      - smackfu 12y ago
        Interesting, VRBO definitely changed their pricing model recently. It used to only be the $350 upfront type, so it only made sense for actual vacation homes. I know a lot of people were dual listing their VRBO places on Airbnb (because Airbnb is free), and I bet VRBO was not getting the renewal numbers they wanted.
  - prostoalex 12y ago
    > I don't see what sets Airbnb apart from other vacation rental websites I think their innovation was allowing shared housing and generally any quirky property. HomeAway and VRBO focused their efforts on professionally managed second homes and vacation properties. By now the network effect has kicked in, and any newcomer would have to convince buyers they're relatively reliable and scam-free.
nknighthb 12y ago
If we are, it doesn't look like the first one, and I'm not sure what it "popping" would look like. Startups aren't burning through a few hundred million and shutting down inside a year. There's no mass of IPOs by companies with no revenue and no realistic plan for getting revenue. And I don't see IPOs posting 500% gains on the first day. Airbnb's been around for 5+ years, provides something people want, and obviously has revenue (though I wouldn't know how much). And so far its investors are all VC or private equity, including a lot of VCs who saw the first bubble up-close. Really, are there any funded startups right now without VCs who came out of the first bubble?
atmosx 12y ago
Absolutely :-)
bane 12y ago
Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"? "Valuation" is such a terrible term, all it really means is "the ROI expected by the investors". We try to make it very complicated with analysis of term sheets and growth rates and all that, but it's just a gamble on the part of the investor. The only difference between gambling and investing is that a gambler doesn't get to set the size of the payout if they win. It's an effort to predict what the company could sell for if an interested buyer made a concerted effort to buy it, but until that happens, it's just a made up number and not newsworthy at all.
- seanflyon 12y ago
  > Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"? This is a great point, but valuation is still a meaningful term, it refers to how much someone thinks the company is worth. Your friend bet $1 that your company is worth more than $10,000,000. We tend to trust people's opinions when they put their money where their mouth is so we pay attention to valuations, but we also need to consider how much money they put where their mouth is.
  - bane 12y ago
    True, but the problem is that "valuation" and front page articles about it sends a specific signal, "this company is worth this much", and like you said, we're supposed to trust people who put the money into the investment. The problem is that no investor is an oracle, and no matter the size of their investment, or what statements they make, can actually make a company have some value until it's sold. At best you can gauge a company's "value" (not valuation) by their revenue and profit, this is an instantaneous assessment backed by hard figures. And you can make a projection, which is a best guess, of the future value of the company based on period over period growth and some notion on how big the market is. But we also don't know what kind of fanciful numbers were being used. Suppose my friend starts a company making internet connected toasters. Well everybody likes toast, therefore size of market = humans on earth. No! You'd be surprised at how unscientifically figures for market size are determined. Here's one I've actually heard for a piece of high-end technical software targeting the Federal government: The U.S. Federal Government employs about 5 million people, if we sell a copy of our software to each employee at $3k/license our market is worth $15 million dollars! And then they're very surprised when the market does not turn out to be that big, and there's a mad last minute scramble to target local government because "there's way more local government than there are federal government". Remember the Segway? They actually hired a professional consulting firm to gauge market size. You know what was predicted? 31 million units inside of 10 years and 50,000 in the first year. Money exchanged hands for this prediction. Valuations were made based on this work. This was supposed to be a company the size of Apple. How many have actually been sold? Nobody knows, but it appears to be well under 50,000, worldwide. But people in suits said this stuff! With nice hair and fancy diplomas on their walls! If I can't trust them who can I trust? I'm not saying figuring out market size is easy, it's hard. So hard that it's wrong far more often than it's right (something like 90% of businesses fail). "Valuation", of which market size should be a critical component, is misleading and not particularly meaningful. And the problem is that we take unmeaningful words like that and turn them into major news.
weavie 12y ago
I'm no expert, but I don't think so yet. At the minute it seems that pretty much all the money is coming from large, well financed entities - venture capital firms and large corporations such as facebook and google. These are large firms who are much not so much subject to emotional impulse and more focused on growth and the bottom line. They are playing a strategic game. Very little of this is coming from an overly hyped up general populace. The NASDAQ is increasing, but it is a fairly slow steady increase compared to the other indices - nothing like the crazy rocketing we saw in 1999. There are few IPO's and they are mostly of relatively stable and profitable companies.
shawndrost 12y ago
Airbnb isn't even an internet company, it's a hotel chain.

Does it seem like we're in another Internet bubble to anyone else?

by DougN7 12y ago

Does it seem like we're in another Internet bubble to anyone else?

If we are, it should be called the Facebook Bubble. After their IPO when the stock lost half it's value, there was a severe market correction in VC as well. It got a lot harder to raise money. Now that the stock is up like 400% from its bottom, the money is flowing again. Want to know when the market will again correct? Just watch the price of FB. Or the new breed once they go public (Uber/Airbnb/Dropbox/Square etc).

easytiger 12y ago
The FB stock dive was largely emotional investing and happens every time when you get an IPO of a brand the general public identify with. I saw it hit about 19 and bought, even if a bit too timidly. I don't think you can read too much into that initial cock up RE facebook's value.

CmonDev 12y ago

I cannot see anything that costs $13 billion in that company. I am probably bad at pricing.

rmsaksida 12y ago
Same here. Aside from taking care of transactions, which is easy to imitate, I don't see what sets Airbnb apart from other vacation rental websites. They are not fundamentally different. Yes, they have a large userbase, but that's easily threatenable considering their fees and lack of distinction. I must be missing something.
- troels 12y ago
  I think you severely underestimate how important it is to have a monopoly on the market. FB's main asset is also its userbase, so by that reasoning they are easy to emulate. It's not that people haven't tried that, but it doesn't work.
  - rmsaksida 12y ago
    Facebook is a free website, and it has massive technical advantages over all its competitors. It's integrated everywhere, the feature set is incredible, and it basically dictates our model of online social networks. Airbnb ultimately depends on how much renters, and indirectly seekers, are willing to pay. Its brand is not as well established as Facebook's (at least in my country). If a compelling alternative came up with lower fees, what would that mean to Airbnb? I'm not sold yet on its permanence.
    - mattmanser 12y ago
      The brand is well established, and outside the US too. Here in the UK Airbnb passes the random friend check, random non-techies know what it is and have used it. In fact I'm often surprised by the people that have.
- icebraining 12y ago
  Doesn't that description fit eBay? Yet it has a $60B market cap.
- smackfu 12y ago
  A website like this lives and dies on their inventory more then their userbase. AirBnB doesn't have a listing fee, which differentiated them from traditional vacation rental places like VRBO. How is a competitor going to get a competitive inventory?
  - anon1385 12y ago
    By being cheaper and by doing what AirBNB did - scrapping and spamming.
  - rokhayakebe 12y ago
    http://www.vrbo.com/info/list-your-property http://www.vrbo.com/info/list-your-property? I think their pricing is similar to ABB Also Homeway has a large inventory, I believe, but a lower market cap: 3B vs 10B.
    - smackfu 12y ago
      Interesting, VRBO definitely changed their pricing model recently. It used to only be the $350 upfront type, so it only made sense for actual vacation homes. I know a lot of people were dual listing their VRBO places on Airbnb (because Airbnb is free), and I bet VRBO was not getting the renewal numbers they wanted.
- prostoalex 12y ago
  > I don't see what sets Airbnb apart from other vacation rental websites I think their innovation was allowing shared housing and generally any quirky property. HomeAway and VRBO focused their efforts on professionally managed second homes and vacation properties. By now the network effect has kicked in, and any newcomer would have to convince buyers they're relatively reliable and scam-free.

nknighthb 12y ago

If we are, it doesn't look like the first one, and I'm not sure what it "popping" would look like. Startups aren't burning through a few hundred million and shutting down inside a year. There's no mass of IPOs by companies with no revenue and no realistic plan for getting revenue. And I don't see IPOs posting 500% gains on the first day. Airbnb's been around for 5+ years, provides something people want, and obviously has revenue (though I wouldn't know how much). And so far its investors are all VC or private equity, including a lot of VCs who saw the first bubble up-close. Really, are there any funded startups right now without VCs who came out of the first bubble?

atmosx 12y ago

Absolutely :-)

bane 12y ago

Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"? "Valuation" is such a terrible term, all it really means is "the ROI expected by the investors". We try to make it very complicated with analysis of term sheets and growth rates and all that, but it's just a gamble on the part of the investor. The only difference between gambling and investing is that a gambler doesn't get to set the size of the payout if they win. It's an effort to predict what the company could sell for if an interested buyer made a concerted effort to buy it, but until that happens, it's just a made up number and not newsworthy at all.

seanflyon 12y ago
> Here's the fun part, if I start a company and get my friend to invest $1 for 0.0000001% of my company. What's my company's "valuation"? This is a great point, but valuation is still a meaningful term, it refers to how much someone thinks the company is worth. Your friend bet $1 that your company is worth more than $10,000,000. We tend to trust people's opinions when they put their money where their mouth is so we pay attention to valuations, but we also need to consider how much money they put where their mouth is.
- bane 12y ago
  True, but the problem is that "valuation" and front page articles about it sends a specific signal, "this company is worth this much", and like you said, we're supposed to trust people who put the money into the investment. The problem is that no investor is an oracle, and no matter the size of their investment, or what statements they make, can actually make a company have some value until it's sold. At best you can gauge a company's "value" (not valuation) by their revenue and profit, this is an instantaneous assessment backed by hard figures. And you can make a projection, which is a best guess, of the future value of the company based on period over period growth and some notion on how big the market is. But we also don't know what kind of fanciful numbers were being used. Suppose my friend starts a company making internet connected toasters. Well everybody likes toast, therefore size of market = humans on earth. No! You'd be surprised at how unscientifically figures for market size are determined. Here's one I've actually heard for a piece of high-end technical software targeting the Federal government: The U.S. Federal Government employs about 5 million people, if we sell a copy of our software to each employee at $3k/license our market is worth $15 million dollars! And then they're very surprised when the market does not turn out to be that big, and there's a mad last minute scramble to target local government because "there's way more local government than there are federal government". Remember the Segway? They actually hired a professional consulting firm to gauge market size. You know what was predicted? 31 million units inside of 10 years and 50,000 in the first year. Money exchanged hands for this prediction. Valuations were made based on this work. This was supposed to be a company the size of Apple. How many have actually been sold? Nobody knows, but it appears to be well under 50,000, worldwide. But people in suits said this stuff! With nice hair and fancy diplomas on their walls! If I can't trust them who can I trust? I'm not saying figuring out market size is easy, it's hard. So hard that it's wrong far more often than it's right (something like 90% of businesses fail). "Valuation", of which market size should be a critical component, is misleading and not particularly meaningful. And the problem is that we take unmeaningful words like that and turn them into major news.

weavie 12y ago

I'm no expert, but I don't think so yet. At the minute it seems that pretty much all the money is coming from large, well financed entities - venture capital firms and large corporations such as facebook and google. These are large firms who are much not so much subject to emotional impulse and more focused on growth and the bottom line. They are playing a strategic game. Very little of this is coming from an overly hyped up general populace. The NASDAQ is increasing, but it is a fairly slow steady increase compared to the other indices - nothing like the crazy rocketing we saw in 1999. There are few IPO's and they are mostly of relatively stable and profitable companies.

shawndrost 12y ago

Airbnb isn't even an internet company, it's a hotel chain.