A bubble and a song

Much has been made recently over the valuations of websites such as Facebook and Groupon ($50bn and $15bn respectively).  The main question being whether these high valuations mean the advent of a new dot-com bubble.

My view is that we will have one, not as pronounced as the one just over 10 years ago but one nonetheless.  My reasons are simple

  • Lack of clarity over the business plan.  Apart from Groupon, none of the big sites really has a convincing business plan for long term strategy.  The reason being that neither Facebook not Twitter were ever developed with monetisation in mind.  Making money from the site was an after-thought once they’d caught on.  Twitter has realised this is an issue and changed CEO but the issue remains.  Facebook is a means of finding and keeping in touch with friends, Twitter is a microblogging service.  Neither of these was developed with the intention of serving ads to people.  Google’s IPO worked because they were monetising something based on what people were after.
  • The sites are over-valued.  Anyone investing knows that they will not make much money from this activity so why invest? Plus, how much is Facebook and Twitter worth to people?  My contention is $0 – you’re not going to pay for something which used to be free and I don’t really care if I lose touch with ‘friends’ who I’ve never contacted using Facebook.  Those that I want to keep in touch with I will find ways to keep in touch with.
  • The web is cyclical… only 4/5 years ago people were saying how MySpace was going to revolutionise the web.  Right now it is about to layoff a whole load of people.  Web2.0 was about collaboration but collaboration came at a price… Free… meaning the horse is already bolted in the race to make money out of this.
  • What about the infrastructure?  How will that impact (a) how current services are delivered, and (b) what new services arise?

That’s enough gloom for now, time for a song

One thought on “A bubble and a song

  1. Pingback: Is Facebook about to lose its sparkle? | The general musings of Andre Santos

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