I’ve been questioned more times in the last year about "are we in the midst of another internet-type bubble?" than any other topic. My reply everytime is that 1) YES when it comes to Web 2.0 companies and 2) NO when it comes to tech in general.
Just like in the original Internet Bubble of 1998-2000, some really original companies will sail through and become part of our everyday lives when bubbles are distant memories. Amazon is a good example. The same will apply this time around when I firmly believe that Facebook has been game-changing and will ‘last the course’. Indeed I am surprised at the maturity they display. Twitter too seems to have become engrained in our society. Although I still worry about the business model – or lack of it. I was hardly encouraged by Twitter’s CEO Dick Costolo’s comment this week that “We should think of revenue like breathing – it’s necessary for life but it’s not the purpose of life”. I still think Twitter will get bought; with Apple being a quite feasible home.
But others will be passing fads. One such company, that I have commented adversely on many times before, is Groupon. Looks like the market shares my concerns as their valuation in their upcoming IPO will be less than half that mooted just a few months ago. They will float <8% of the stock and raise c$500m. Even so that would give a valuation of c$11b. Still pretty amazing for a loss-making company on annualised revenues of <$2b.
I’ve tried Groupon and quickly decided that it wasn’t for me. (See Groupon offers and other posts.) Then the tales of small retailers being swamped, of customers being duped etc quickly emerged. On top of that Groupon was heavily criticised for omitting its marketing costs from net income– ie something akin to my old campaign over the capitalisation of software development. It also seems to be a concept that is so easy to copy – indeed most of the other main players either have or plan similar services.
Footnote – Talking of passing fads, I seem to have upset some people with my Freejellybeenz.com 2.0 post about Jonathan Rowland, JellyWorks and his new vehicle JellyBooks. JellyBooks was formed to invest in new Web 2.0 companies and ‘ride the wave’ just like JellyWorks intended to do with the internet back in Dec 1999 – a few months before the bubble burst. Anyway, without compounding the issue, I can factually report that JellyBook’s IPOed at 10p in June 11 and their share price is now 4.75p. Combined with the Groupon valuation reduction, I think we might be able to draw our own conclusion about where we currently might be in the Web 2.0 ‘bubble’ curve.