Second dot com bubble?

What in the world is goin on these days? It's like no one remembers the first crash..

http://www.guardian.co.uk/technology/2011/feb/10/twitter-talks-buyers-facebook-google

Twitter:
According to the Wall Street Journal, one thing has been agreed on: the loss-making firm is worth somewhere between $8-10bn.
This year Twitter's revenues are expected to more than double to between $100-110m.
The new valuation would be a significant leap for Twitter. Last December Twitter raised another $200m in funds from Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers and existing Twitter investors.

Facebook recently raised $1.5bn in a financing in a deal that valued the social network at $50bn, up from $10bn in mid-2009. Goldman Sachs briefly offered its top tier customers the opportunity to invest in Facebook but the bank was so overwhelmed by requests and publicity that it had to withdraw the offer for fear of breaching financial regulations on private placements.

Groupon, the online discount company, is also planning an initial public offering. The Chicago-based company earlier rejected a $6bn offer from Google.

LinkedIn, the business-oriented social network, is also planning an IPO that could value the company at over $2bn.

Zygna, maker of the phenomenally popular Farmville online game, is also planning to issue shares.

There have also been a number of new media buyouts. The most prominent came earlier this week when AOL paid $315m – $300m of it in cash – for Huffington Post, about 10 times the media company's 2010 revenues.





How the hell can someone value Twitter at 100 times in annual revenue? The world is so so stupid.. Once one bubble bursts, create another.

ei.sdraob

Well if Goldman Sachs is involved then there's definitely a scam brewing

jackiebaron

Deleted User wrote: »

What in the world is goin on these days? It's like no one remembers the first crash..

http://www.guardian.co.uk/technology/2011/feb/10/twitter-talks-buyers-facebook-google

Twitter:
According to the Wall Street Journal, one thing has been agreed on: the loss-making firm is worth somewhere between $8-10bn.
This year Twitter's revenues are expected to more than double to between $100-110m.
The new valuation would be a significant leap for Twitter. Last December Twitter raised another $200m in funds from Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers and existing Twitter investors.

Facebook recently raised $1.5bn in a financing in a deal that valued the social network at $50bn, up from $10bn in mid-2009. Goldman Sachs briefly offered its top tier customers the opportunity to invest in Facebook but the bank was so overwhelmed by requests and publicity that it had to withdraw the offer for fear of breaching financial regulations on private placements.

Groupon, the online discount company, is also planning an initial public offering. The Chicago-based company earlier rejected a $6bn offer from Google.

LinkedIn, the business-oriented social network, is also planning an IPO that could value the company at over $2bn.

Zygna, maker of the phenomenally popular Farmville online game, is also planning to issue shares.

There have also been a number of new media buyouts. The most prominent came earlier this week when AOL paid $315m – $300m of it in cash – for Huffington Post, about 10 times the media company's 2010 revenues.





How the hell can someone value Twitter at 100 times in annual revenue? The world is so so stupid.. Once one bubble bursts, create another.

Short sell the lot of them and retire to the Caymans.

msg11

Sure isn't this what we are paying for at the end of it all ?

For footballers hookers and more web servers than spiders webs.

smk89

What are we gonna invest in then? Property, that turned out well.

Dunjohn

Honest question: How exactly does Twitter raise revenue?

bnt

Dunjohn wrote: »

Honest question: How exactly does Twitter raise revenue?

They do sell ads, but it's mostly about being a takeover target. :rolleyes:

amacachi

Amazon took something like 15 years to become profitable overall and they actually sell things. The idiocy around internet investment is back, good ol' cheap credit and low interest rates on savings.:rolleyes:

Ri_Nollaig

I have been thinking the same thing for ages.

I have no idea how people value some sites so high, it seems to be all based on what they could make or what they could then be sold on for.
Sites like facebook, how can that possibly be worth 60 billion? Is advertising really that good?

I remember hearing digg was valued at 400 million ...why? Its just one of many portal sites and it doesn't even seem to be as popular as it was.

Once a site/company doesn't actually produce anything whats stopping the next big thing just coming in and replacing them. Sure facebook is flying high now but it could just as easily be forgotten about in a year or two.

omahaid

It doesn't seem to be exactly a dot com bubble, it's more of a social media bubble.

ScumLord

Deleted User wrote: »

How the hell can someone value Twitter at 100 times in annual revenue? The world is so so stupid.. Once one bubble bursts, create another.

A company isn't valued just on it's yearly overturn.

I'm sure plenty would look at the fact it's got millions of consumers using it as valuable, it's exposure on with other media means it's a household name and to some people that's worth more than turnover.

Google couldn't make money in the beginning either but became so fundamental to internet life that they just had to find a way to take advantage of that.

The internet works like carlito's way just in reverse.

PeakOutput

Deleted User wrote: »

How the hell can someone value Twitter at 100 times in annual revenue? The world is so so stupid.. Once one bubble bursts, create another.

this happens all the time

the valuation is based on the potential obviously

personally i do think twitter will fail as i cant think of any way to monetise it properly but this is not the sign of a bubble

PeakOutput

amacachi wrote: »

Amazon took something like 15 years to become profitable overall and they actually sell things. The idiocy around internet investment is back, good ol' cheap credit and low interest rates on savings.:rolleyes:

do you understand advertising at all?

msouden

Well said. It's completely overvalued, which ties right in with just being "cool"/"trendy". If you're dumb enough to gamble on that stuff, then I suppose you get what you deserve. Lots of slow learners out there. (sometimes I'm one.)

Just yesterday in my Social Informatics class the slide came up titled "Social Network Analysis" and you could see the undergrads sit up and begin to actually pay attention. It's pretty ingrained as "hot" right now is all I'm saying. They glazed over pretty quick again when they realized it had nothing to do with Twitter/Bookface and were being shown models and flow diagrams.

Now - don't get me wrong. I tweet. I love it. I keep in some sort of touch with friends on it and all that. It's a very interesting thing to study and there will be ripples and social changes still to come, but yeah. fiscal hyperbolic drama should really only be engaged in buy those who can truly afford it - in every sense of the word.

PeakOutput

Ri_Nollaig wrote: »

I have been thinking the same thing for ages.

I have no idea how people value some sites so high, it seems to be all based on what they could make or what they could then be sold on for.
Sites like facebook, how can that possibly be worth 60 billion? Is advertising really that good?

I remember hearing digg was valued at 400 million ...why? Its just one of many portal sites and it doesn't even seem to be as popular as it was.

Once a site/company doesn't actually produce anything whats stopping the next big thing just coming in and replacing them. Sure facebook is flying high now but it could just as easily be forgotten about in a year or two.

all of the things you say are correct and are indeed possible, the difference is once you are first you are in a powerfull position to not lose that position.

digg isn't as popular as it once was but it is still 133rd most visited website in the world and 87th in america. last time i looked at its alexa rank, alexa was estimating its adwords revenue per month at around 4million, im trying to find the link to reference that now but it appears alexa has changed its layout

and yes advertising really is that good

why are media companies in general worth so much? they all make their profits off advertising the internet is just another form of media

gtsc

I wonder how much boards would be worth:D

seamus

Facebook, linkedin, groupon, zynga. All strong companies with an obvious revenue stream and potential.
World of Warcraft introduced the world to the concept of people paying for a game and then paying a monthly subscription just to play the thing. Zynga found something else entirely with Farmville - the game is free to play, but to progress in any meaningful way, you have to put down some hard cash. This has proven to be a monumentally profitable business model - you're effectively selling non-existent products to people which cost you nothing. The profit margin on farmville cash is 100%. It costs them nothing. That is quite literally money for old rope.
That's a company that's worth something.

Twitter is something entirely different though. It's effectively a feed system like a USENET. You can't use it to advertise because people can ignore your advertisements. You can't display on-screen adverts because most people use the feed, not the website. I really don't see how you can turn it into a revenue stream without fundamentally affecting how it works, which will cause it to lose half its userbase.

ScumLord

gtsc wrote: »

I wonder how much boards would be worth:D

$252,589 according to this site.

seamus wrote: »

Twitter is something entirely different though. It's effectively a feed system like a USENET. You can't use it to advertise because people can ignore your advertisements. You can't display on-screen adverts because most people use the feed, not the website. I really don't see how you can turn it into a revenue stream without fundamentally affecting how it works, which will cause it to lose half its userbase.

The media are pretty dependant on it now. Twitter can't hit the end user but like google can hit the businesses that now depend on it for content and even depend on the twitter brand for a certain amount of internet cred.

Killer Pigeon

Ads by Google is only spurring on the second dot com bubble and subsequent crash.

seamus

ScumLord wrote: »

The media are pretty dependant on it now. Twitter can't hit the end user but like google can hit the businesses that now depend on it for content and even depend on the twitter brand for a certain amount of internet cred.

Just because they're dependent on it though, doesn't make it worth money. Twitter doesn't take in any money. It doesn't matter if Fox news post to it 500 times a day and consider it a lifeline. If twitter isn't making money, it's going to have to close down.

As far as I can see, the only way to do it is to change their business model and require cash payment for anyone looking to make more than say 20 tweets per day.

But then you risk alienating your audience and some guys sets up "chatter.com" which has the same format and usage but allows 100 "chats" per day before being charged, and everyone jumps to chatter.com.

Or someone basement nerd sets up a totally free twitter competitor, everyone jumps to that, said nerd sells it off for $2m and that company eventually finds itself with the same problem.

Twitter needs to find a revenue stream which doesn't affect the base functionality which they are currently. Facebook is the example of this - there are no facebook "features" now that were previously free but now have to be paid for. Because as soon as you start asking people to pay for things which were previously free, they'll just up and leave and go to someone else who is offering it for free.

laugh

seamus wrote: »

Just because they're dependent on it though, doesn't make it worth money. Twitter doesn't take in any money. It doesn't matter if Fox news post to it 500 times a day and consider it a lifeline. If twitter isn't making money, it's going to have to close down.

As far as I can see, the only way to do it is to change their business model and require cash payment for anyone looking to make more than say 20 tweets per day.

But then you risk alienating your audience and some guys sets up "chatter.com" which has the same format and usage but allows 100 "chats" per day before being charged, and everyone jumps to chatter.com.

Or someone basement nerd sets up a totally free twitter competitor, everyone jumps to that, said nerd sells it off for $2m and that company eventually finds itself with the same problem.

Twitter needs to find a revenue stream which doesn't affect the base functionality which they are currently. Facebook is the example of this - there are no facebook "features" now that were previously free but now have to be paid for. Because as soon as you start asking people to pay for things which were previously free, they'll just up and leave and go to someone else who is offering it for free.

Whats wrong with ads, relevant to the tweets?

ScumLord

seamus wrote: »

Just because they're dependent on it though, doesn't make it worth money. Twitter doesn't take in any money. It doesn't matter if Fox news post to it 500 times a day and consider it a lifeline. If twitter isn't making money, it's going to have to close down.

They could start charging media networks to retransmit tweets. They could offer an expanded tweet service for paying clients.

seamus

laugh wrote: »

Whats wrong with ads, relevant to the tweets?

How? It's a text feed. I view tweets coming up through an extension in Firefox. Twitter cannot insert an ad into that. They could fire off another tweet automatically from the same account, which is an ad. But if every tweet from rtenews was followed by a second tweet which is an automated ad, then I'm going to stop following RTE news.

ScumLord wrote: »

They could start charging media networks to retransmit tweets. They could offer an expanded tweet service for paying clients.

Retransmit them where?
Unless I'm following the retransmission feed, I won't see it. And if a feed is nothing but RT's, I'm not going to watch it. Nobody's going to pay to have it reposted on other networks like facebook because free programs already exist which do this.

I don't know the exact tech behind twitter, but one possibility I could see is to put ads into the feed from twitter. So when I log in and my client pulls out my feed, there's a relevant ad inserted into the middle of it. Do this in a clever way (say one per 100 tweets) and people might be happy to let that go.

But then clients will start to add features which automatically remove ads from the feeds.

The problem which all advertisers face is that most people understand that advertising pays for most media to stay on the air, but at the same time we do not tolerate intrusive or obstructive ads.

ScumLord

seamus wrote: »

Retransmit them where?

TV, I've seen a few shows do it. commercial websites, it's not uncommon for software to be free for personal use but commercial sites have to pay. It's different when dealing with media companies because branding means everything to them.

Wibbs

Killer Pigeon wrote: »

Ads by Google is only spurring on the second dot com bubble and subsequent crash.

That has been my suspicion for a while. Google need to convince all business that online ads actually generate revenue. Now of course often they do, but IMHO not to nearly the degree claimed. How many of us actually click on ads? I have never in ten years online deliberately clicked on an web ad. I doubt I'm alone in that.

Google have built up this framework of stats and hits and hits per day etc to claim results that may not exist. Even something like smart phones could bugger the stats, if these "hits" are based on IP's. On my phone I might log into a site three times in a day while out and about. That'll come up as three "unique" IP visitors when its nothing of the sort. In the cases where Im a user such as here on Boards that's less an issue, because I'll be logging in as a distinct user "wibbs". But it's interesting that a load of sites are claiming an increase in userbase since smart phones really kicked off.

seamus

ScumLord wrote: »

TV, I've seen a few shows do it. commercial websites, it's not uncommon for software to be free for personal use but commercial sites have to pay. It's different when dealing with media companies because branding means everything to them.

I'm still not getting you. Twitter can't send stuff to TV. TV shows take stuff from twitter feeds. If TV shows find that they're having ads directed to their feeds, they'll ignore the feed doing so.

No, it's not uncommon for business to have to pay for free consumer items, but the time for that is long gone. If twitter were to decide tomorrow that commercial enterprise had to pay, then the media will crush twitter and all move to the next website which is offering the same service for free.

Chips Lovell

Is it like the last crash? Yes and no.

Last time around you had firms that had barely broken $1 million in revenues floating and using investor money to try and buy a market for themselves within the space of months.

Twitter is on track to have revenus of $100 million this year. Facebook is thought to have turned over $2 billion or so last year. Most of the old dot com ventures could only dream of that.

I do think both are overvalued at present, especially Twitter. I'd agree with Seamus' assessment that it's much harder to monitise than Facebook.

Wibbs

el tonto wrote: »

Twitter is on track to have revenus of $100 million this year.

How? How does it earn money?

L.Jenkins

jackiebaron wrote: »

Short sell the lot of them and retire to the Caymans.

You could buy the Caymans at that rate.

Chips Lovell

Wibbs wrote: »

How? How does it earn money?

Licensing and advertising.

AlmightyCushion

Wibbs wrote: »

That has been my suspicion for a while. Google need to convince all business that online ads actually generate revenue. Now of course often they do, but IMHO not to nearly the degree claimed. How many of us actually click on ads? I have never in ten years online deliberately clicked on an web ad. I doubt I'm alone in that.

Google adwords is pay per click. If no one clicks on the ad you don't pay for it. Plus, I'd say internet ads are more likely to lead to revenue than print media ads.

el tonto wrote: »

Is it like the last crash? Yes and no.

Last time around you had firms that had barely broken $1 million in revenues floating and using investor money to try and buy a market for themselves within the space of months.

Twitter is on track to have revenus of $100 million this year. Facebook is thought to have turned over $2 billion or so last year. Most of the old dot com ventures could only dream of that.

I do think both are overvalued at present, especially Twitter. I'd agree with Seamus' assessment that it's much harder to monitise than Facebook.

Revenue does not mean profit though. You can make billions in revenue but if you're losing money you're buggered in the long run.

Chips Lovell

AlmightyCushion wrote: »

Revenue does not mean profit though. You can make billions in revenue but if you're losing money you're buggered in the long run.

Absolutely. My point was that they stand in stark contrast to the previous generation of dot coms that were floating with hardly any revenues. I doubt if either are profitable at the moment, nor even if they should be profitable at this stage. But if revenues hold up and with lowish overheads, they ought to be able to turn a profit at some point. I think the real issue is whether they can generate enough cash to justify those valuations.

PeakOutput

AlmightyCushion wrote: »

Google adwords is pay per click. If no one clicks on the ad you don't pay for it. Plus, I'd say internet ads are more likely to lead to revenue than print media ads.

THIS

you can choose with google adds weather to pay per impression(every time someone sees an add) or per click (every time someone clicks on an add)

the advertisements can be minutely targeted to people who they already know are interested in a topic. this cant be done on any other medium to the same degree. you know people who buy the financial times are interested in business but thats about it. with google, no matter what you are selling you can target the exact people that make up that niche and you only pay for those people. if you have a product that will appeal to students who are 18-20 yrs old you can target them and only them

the possibilities are truly endless, this dosnt mean that a bubble is not possible but i dont believe this is happening right now

what is happening to an extent is an angel investor bubble / start up investor bubble

new companies (like diaspora for example) are able to create a bit of hype around them because they are 4 apparently smart(they come off very badly in any videos iv seen) students from nyu and they have a new (not really) approach to social media. investors know that 1 in 10 or 1 in 50 of these companies will be a massive success and sell for hundreds of millions so they have no problem lumping start up capital at them

i dont think there has ever been a better time to set up a technology business, particularly in the us, as there is now

AlmightyCushion

PeakOutput wrote: »

THIS

you can choose with google adds weather to pay per impression(every time someone sees an add) or per click (every time someone clicks on an add)

the advertisements can be minutely targeted to people who they already know are interested in a topic. this cant be done on any other medium to the same degree. you know people who buy the financial times are interested in business but thats about it. with google, no matter what you are selling you can target the exact people that make up that niche and you only pay for those people. if you have a product that will appeal to students who are 18-20 yrs old you can target them and only them

I didn't even consider any of that. I just thought if I see something advertised on a web page, I can click and impulse buy it then if I like it. If I see something in a magazine I have to remember to go online/instore and buy it. Between the time I see it and end up buying it, I could forget all about it or just talk myself out of it. But all of what you said is still true as well.

seamus

AlmightyCushion wrote: »

I didn't even consider any of that. I just thought if I see something advertised on a web page, I can click and impulse buy it then if I like it. If I see something in a magazine I have to remember to go online/instore and buy it. Between the time I see it and end up buying it, I could forget all about it or just talk myself out of it. But all of what you said is still true as well.

Even more importantly than that, you buy it from the company who advertised it.

So in a magazine you might see an ad for Curry's selling the latest iPad, but you go to a closer electronics store to get it instead. I imagine there's a term in marketing for this kind of inadvertent sale.
With web ads, you click on the Curry's ad and you buy it from Currys...

AlmightyCushion

seamus wrote: »

Even more importantly than that, you buy it from the company who advertised it.

So in a magazine you might see an ad for Curry's selling the latest iPad, but you go to a closer electronics store to get it instead. I imagine there's a term in marketing for this kind of inadvertent sale.
With web ads, you click on the Curry's ad and you buy it from Currys...

That's another thing I didn't even consider. Doesn't print media cost more? Given all this I can't see how that's justified.

ScumLord

seamus wrote: »

I'm still not getting you. Twitter can't send stuff to TV. TV shows take stuff from twitter feeds. If TV shows find that they're having ads directed to their feeds, they'll ignore the feed doing so.

Whenever I see twitter posts used on TV it's accompanied with the twitter logo and the mention of the twitter brand name. If a news station wants to display tweets from the people watching it's service it would have to pay twitter for the use of it's branding. It wouldn't just be a case of they would just drop it because all their customers (who can still use it for free) would still be tweet their points in. I'm not saying it's a guaranteed bonanza but it's an income, wouldn't be a big one either.

PeakOutput wrote: »

with google, no matter what you are selling you can target the exact people that make up that niche and you only pay for those people.

I don't know if it really works, the only time I've ever clicked those ads is by accident, I don't ever pay any attention to the content of the ads.

aidan24326

Some dot coms are probably still being highly overvalued.

Bebo was bought by AOL for something like 850 million dollars, and sold on two years later for 10 million when they realised there was no money in it. Ouch.

PeakOutput

ScumLord wrote: »

I don't know if it really works, the only time I've ever clicked those ads is by accident, I don't ever pay any attention to the content of the ads.

when i was advertising online i was getting about 2% click through rates, this means that about 2% of the total number of people who see the add clicked it

the industry average is 1-3%

if 1 million people see your add (which is easy by the way, i had multiple millions viewing ads i had on bing) then 2% of people is 20,000 people. if you know what your doing each of those 20,000 clicks can cost as little as 1cent each so thats 200euro to get 20,000 people who are specifically interested in your product onto your sell page

now obviously its not as simple as that for every product but then companies have smarter people then me doing this for them but thats the principle

edit, i cant remember this exactly now but i think if you own a website you an expect to make 1cent (or was it 10) for every 1000 people that visit your site

Ri_Nollaig

aidan24326 wrote: »

Some dot coms are probably still being highly overvalued.

Bebo was bought by AOL for something like 850 million dollars, and sold on two years later for 10 million when they realised there was no money in it. Ouch.

Its not like history repeats itself.

Chips Lovell

aidan24326 wrote: »

Some dot coms are probably still being highly overvalued.

Bebo was bought by AOL for something like 850 million dollars, and sold on two years later for 10 million when they realised there was no money in it. Ouch.

It wasn't that there was no money in it per se, it was more that Bebo (and MySpace) got eaten alive by Facebook. They didn't build on their early successes.

th3 s1aught3r

Just think about how many people now visit Facebook and Twitter and the like every day, tens of millions. Now consider how much they can charge for advertising on those sites if they so wish. Do the math

Googles revenues are unbelievble, and people said they wouldnt make much out of search :rolleyes:

ScumLord

th3 s1aught3r wrote: »

Just think about how many people now visit Facebook and Twitter and the like every day, tens of millions. Now consider how much they can charge for advertising on those sites if they so wish.

Not really, as they say themselves your not getting your ad displayed to huge amounts of people but instead to relevant people. Unlike a TV ad where hundreds of thousands will see your ad (whether they have an interest or not) targeted ads go to far fewer people.

The other thing about targeted ads is that the real advantage is to smaller companies that want to target local people and those businesses don't have big advertising budgets.

While the value of targeted advertising is better it's still a much smaller amount of people seeing your ad.

I don't see how advertising can possibly take in so much revenue.. No one I know clicks my ads. Is there a whole other type of internet user out there or something?