justlukeyou Posted February 21, 2011 Share Posted February 21, 2011 The Guardian newspaper claims that we are heading for another internet bubble. Facebook = $60 bn, Twitter = $10 bn and $2m for a website which allows people to annouce that a friend or relative has died. Does anyone think that the current internet investment bubble could burst and if so could it seriously damage the legitimacy of the internet with many people viewing it as a folly instead a serious business case. Quote Link to comment Share on other sites More sharing options...
Philip Posted February 21, 2011 Share Posted February 21, 2011 I don't think we'll have another .com crash like we did years ago. Even though it is possible, I just don't see it happening. Quote Link to comment Share on other sites More sharing options...
cssfreakie Posted February 22, 2011 Share Posted February 22, 2011 The Guardian newspaper claims that we are heading for another internet bubble. Facebook = $60 bn, Twitter = $10 bn and $2m for a website which allows people to annouce that a friend or relative has died. Does anyone think that the current internet investment bubble could burst and if so could it seriously damage the legitimacy of the internet with many people viewing it as a folly instead a serious business case. not at all, nowadays analyst (off financial institutions) are much better capable of calculating the value of companies. Internet is serious business and it will always be that way. Quote Link to comment Share on other sites More sharing options...
chaseman Posted February 22, 2011 Share Posted February 22, 2011 What is the website with death announcement called? I'd like to have a look at it, sounds like a funny idea. lol To the topic: People have become smarter and more cautious, they understand internet companies better, and that the valuations of those is not like with industry companies. I remember how Twitter was a year ago valued at 800 million and now I'm reading an article that it's for sale for $9 or $10 billion. In one your from 1bn to 10bn (source: http://www.guardian.co.uk/technology/organgrinder/2011/feb/10/twitter-facebook), it doesn't work this way with industry companies. With industry companies you simply take the revenue * 30. Pinpointing Twitters revenue is not so easy, and it's also not as easy as *30 with internet companies. But I'm drifting away, to answer your question, another bubble is possible, we don't know how web 3.0, 4.0, or 5.0 may look like, new promising technology may come up where everyone invests in and it turns out to be a big loss. On the other hand I agree that the "interwebs iz seriouz bizzness", yet it's still important to always calculate it through. Last but not least: If the numbers don't add up, you don't add up. Quote Link to comment Share on other sites More sharing options...
xylex Posted February 22, 2011 Share Posted February 22, 2011 Two major factors that differ today's dot-com's from the 1999 dot-com's are public investment in the companies, and the demonstration of how to generate positive revenue from a dot-com. For it to be a bubble like the 1999 dot-com bubble, there has to be significant money attached to the overinflated values. In the previous bubble, all of the inflated values of a company were attached to IPO's that pushed these values up even higher and those values were backed by the inflated stock price. In today's overvaluations, for the most part it's just a number on paper that some exec is tossing around - there's little or no actual money attached to that valuation, so if the real valuation is far less, no loss has taken place other than to the owners/co-founder's bragging rights. As some of the bigger social media companies start going public, this might change a little for a handful of companies, but the 90's idea that attaching .com to your corporate name meant you could instantly raise millions in an IPO is long gone. On the other point, in the first dot-com bubble, no one had demonstrated how to make a profit using the internet. So like the Guardian article says, everything was measured some "new way." Today, there are hundreds if not thousands of profitable multi-million dollar tech companies, so it does give something to compare newer startups against, as well as provide a proven roadmap to go from something like a Twitter with a billion users and little to no revenue into a profitable internet monster. So yes, we're not valuing companies in the traditional annual profit / current interest rates for a valuation, but there are models that can be used to value these companies with some degree of accuracy. Quote Link to comment Share on other sites More sharing options...
chaseman Posted February 22, 2011 Share Posted February 22, 2011 xylex, good written post. I'm wondering about the last part you wrote. What type of models would that be to value an internet company today? Is the article that I posted realistic saying that Twitter is for sale for up to $10bn? I'm thinking to myself, if somebody invests that kind of money into Twitter, he eventually wants to get it back and even more of what he has invested. How would that even be possible with a business like Twitter, other than promoted Tweets, and ads in the search results between the Tweets? I remember how people went crazy that YouTube was acquired for 1.65bn, whereas I see way more possibilities to profit out of YouTube than with Twitter, even though I think Twitter is a great business model. Quote Link to comment Share on other sites More sharing options...
.josh Posted February 22, 2011 Share Posted February 22, 2011 Not really directly relevant to topic, but IMO for YouTube specifically, people "went crazy" not so much because of the price tag, but because of who bought it and what that would mean to YouTube's future as a dominant online video sharing community. Quote Link to comment Share on other sites More sharing options...
chaseman Posted February 22, 2011 Share Posted February 22, 2011 Not really directly relevant to topic, but IMO for YouTube specifically, people "went crazy" not so much because of the price tag, but because of who bought it and what that would mean to YouTube's future as a dominant online video sharing community. Till this day I'm reading articles which debates if Google's investment ever paid off, that was (in my eyes) where people majorly went crazy, if the payment is ever going to pay off and how is it going to pay off. Quote Link to comment Share on other sites More sharing options...
xylex Posted February 22, 2011 Share Posted February 22, 2011 xylex, good written post. I'm wondering about the last part you wrote. What type of models would that be to value an internet company today? Is the article that I posted realistic saying that Twitter is for sale for up to $10bn? I'm thinking to myself, if somebody invests that kind of money into Twitter, he eventually wants to get it back and even more of what he has invested. How would that even be possible with a business like Twitter, other than promoted Tweets, and ads in the search results between the Tweets? The Twitter proposed revenue model is a combination of promoted tweets that show up first in search results, and targeted advertising of tweets that will show up in user's streams regardless of whether or not they searched for the result. The promoted tweets showing up first is basically the same model as AdWords, any of the other search model equivalents, or something like YouTube's promoted videos. The second, more invasive method, can be compared to models like AdSense ads or embedded text links in email newsletters. But using those models as a comparison, you can calculate how big the potential advertiser pool is, how much advertisers will pay per impression, and how many impressions you will get with an established user base. The reason for the high valuation is the user base, since most numbers you would get from those models times Twitter's 250 million users leaves you with a pretty big number. Twitter also has an untapped potential revenue stream of embedding ads directly in tweets. The 140 character limit was originally designed to potentially leave the extra 28 characters in an SMS message for embedded ads, and their user agreement still gives them permission to do this. They haven't done this or announced plans to since there is a limit to how much change and intrusiveness your user base will take before they jump ship (think MySpace) but the potential is there and that would be a huge amount of revenue with 100 million tweets going out each day. And compared to YouTube, the operating costs of Twitter is nothing - you're sending 140 characters down to someone instead of an HD video, so virtually any amount of revenue per tweet easily offsets the cost of delivering that tweet. Quote Link to comment Share on other sites More sharing options...
.josh Posted February 22, 2011 Share Posted February 22, 2011 Till this day I'm reading articles which debates if Google's investment ever paid off, that was (in my eyes) where people majorly went crazy, if the payment is ever going to pay off and how is it going to pay off. Well...in general I agree with that concern but IMO Google has a lot of money and power (and therefore lots of druish princesses) and will not be going anywhere...ever. They could have just taken that 1.65bn and literally used it as toilet paper and it wouldn't really hurt them, other than possibly inflaming some hemorrhoids. From that PoV, even if YouTube did not bring forth untold riches...no real big loss for them. That doesn't mean you should make stupid business decisions just because you have more money than you know what to do with...but just sayin'...I think people have been/are over-reacting about it. I don't know all the ins-and-outs of what Google does to make money off of YouTube but I can think of a whole lot of things they can do to make plenty of money off it, and I'm just some random nobody, so I'm quite sure Google will inevitably implement or at least test market virtually anything I have thought of and then some, and be just fine. Quote Link to comment Share on other sites More sharing options...
JonnoTheDev Posted February 24, 2011 Share Posted February 24, 2011 I don't know all the ins-and-outs of what Google does to make money off of YouTube Partner channel advertising, and it's bloody impressive. I was searching google for some tips on a plumbing job that I needed to do in the house. Later that day I was watching a few random videos on YouTube and I was getting adverts on the video preload for plumbing supplies, plumbers etc. They have the advertising working from your google searches to deliver targeted ads. In the same way as google's other advertising revenues, they get paid when you click. Quote Link to comment Share on other sites More sharing options...
.josh Posted February 24, 2011 Share Posted February 24, 2011 Yeah I mean I do see a lot of their $$ making efforts, and perhaps I perceive more than the average person on this count, since I work in the analytics/tracking industry. But I don't work for google or anything so it's still limited :/ Quote Link to comment Share on other sites More sharing options...
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