As Steve so well explained that the previous valuation of Internet companies prior to the last Internet bubble was based on popularity more than any other aspect of the company. As the valuation of companies seem to have returned to the same model of popularity, it seems that further thoughts need to be applied to the next generation of Internet company valuation proceedures.
Now if companies work solely upon the basis of popularity then they are destined to fail. This is regardless of them being a Web 2.0 Social Media company or something else. So what would be the better valuation method for internet based companies? While popularity seems to work in many aspects it proves not to be the only valuation method that should be considered.
As you look at the differences between companies like Twitter and LinkedIn (for example). Twitter with it's enormous popularity across all groups and companies has very limited revenue generation as it isn't based upon the use of ads to generate its income. LinkedIn on the other hand is very popular based upon the business community's envolvement to the site. LinkedIn generates money from ad sales and also providing HR components to companies across the globe. They can generate actual revenue from the business interactions and provide a basis of sustainability. With the little amount of ads posted to Twitter, how do they expect to become and maintain profitability. This is where the valuation methods fail. Regardless of the popularity of the site, the business model needs to one in which the company can become and remain solvent.
So as we look to the future and learn from the past, the valuation process needs to be more focused on what the internet company offers as well as its popularity. If there is a tangible product that can be tracked and measured, then just as in most brick and mortar companies the valuation method is much easier to justify.
Great pieces on your prediction of an impending bubble. However, I like you remember the last one and it was primarily in the US as we were leading the way at that time on the Internet. Today is a lot different and though we are still leaders in Internet companies and technologies, there are other profitable Internet companies outside of the US that may not be valued the same way as US companies. Saying that, is your prediction for a Global Internet bubble or just a US based one?
Brian, it's just a question of timing for the existing investors (private capital).
Can they get their money out either by M&A (Twitter sold to stupid company) or IPO (stupid investors buy stupid company) befre everyone realises Twitter doesn't have a business model and may never have one, or something hotter than twitter comes along?
The answer may well be yes, but that doesn't make Twitter a "good" company or an investement that I personally would be proud of even if i made money from it. I certainly would never, ever work at a company like that. It smells.
I like my investments to be in real "stuff" that actually makes money. I know - i live in the wrong century.
One easily forgets a time when television and radio was free via the public airwaves...
Now we have Cable TV, Satellite TV, Dish Network, DirecTV, Sirius Radio, and XM Radio...
It's only a matter of time, you can stomp your feet in protest all you want and you can be left behind holding on to your "I want my Internet Content for Free" flag all you want -- just don't cry when we say, "We told you so..."!!
It seems that the only difference in the Internet age is how quickly entrepreneurs forget history. Once again, the emperor has no clothes. The only way to make money investing in a business which has no revenue is to sell during the honeymoon (flipping). That is not investment in the value of the business. It's an investment in the foolishness of other investors.
I hadn't really paused on this before your video: "Investors in Twitter better pray they get their money back," is what I think you said.
It made me wonder what they were hoping to get out of the investment. No one could reasonably think they would get a return on that investment. I guess they could hope they could get stock at an IPO price and hope that suckers would buy it at higher prices, but unless the investors were going to flip the stock, reality (and gravity) will eventually set in.
Not that they asked or that I had money, but if I was stopped today and asked to invest in Twitter, other than saying I owned something that many people talk about, I can't see there is any benefit.
Re: "there's a sort of smugness to people at the moment, isn't there? "I'd never PAY for online content" - well, these are the same people that overpaid for their Evian and i-phone, and got ripped off for $8 for that soy maccafrappcrappo on the way to work."
I defiantly think some users will pay for content, but the majority already have a mindset of Internet content being free. Some newspapers have toyed with the subscription model online but it's been vastly unsuccessful. The differance is the maccafrappcrappo started off at $8 and users accepted that. Going from free to payed is harder that started off payed.
When Reiter gets incensed over incompetent Verizon FiOS order-taking and support, he broadcasts it via Twitter. Did it do any good? How should your company offer Twitter support? Watch this for all the answers.
If you listen to the hype, clouds are everywhere. But if you look at the data, it turns out most customers say they still wouldn't use cloud computing for mission-critical apps or data. What's holding them back? Fritz investigates.
Imagine being able to use your mobile phone to pay taxi and mass transit fare; use vending machines; make retail purchases; and check in at hotels. Every day, millions of citizens in Japan, S. Korea, and soon Singapore do so simply by waving their mobile phones in front of point-of-sale terminals using near-field communication or related technology. But, while the technology is readily available in the US, it will be some time before Americans can use their cellphones as mobile wallets.
The city of San Francisco is on the leading edge of using the Internet to provide government transparency. It is providing WiFi for its have-nots, and its DataSF.org initiative is putting the city's valuable data back in the hands of its citizens, with innovative results.
What can users today do to protect their online privacy? The simplest and most obvious option is to not use the Internet – at all. However, once all digital information is consolidated over the Internet, trying to protect digital identity by simply unplugging from the Internet becomes impossible – a fact that has manifest implications for civil liberties, Saunders says.
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