May 22, 2012

477 words 3 mins read

Has the air been let out of the Web2.0 Bubble?

I’m not really sure what to call our current tech bubble, so I decided that Web2.0 is probably most applicable. Regardless of what you call it, there is no denying that things are looking very similar to the 2000’s “Dot Com” Bubble. A company makes a pictionary clone and gets bought for $200 million. A small group makes an app to take retro looking pictures and share them; they get purchased for $1 billion. Then there is the Facebook IPO, a company valued at $100 billion, or roughly $100 per user. Now that “FB” is public, we can keep an eye on what the rest of the world thinks of our tech bubble… and it’s not looking good.

My job is in technology. I want the technology field to do well. When things bubble, there is more work for me at better pay. Even with all that said, bubbles like the dot-com era are

very dangerous. First, investors start throwing their money at everyone and anyone, but then the bubbles burst and no one can get a dime anywhere. In short, when the bubble pops, things suck A LOT more than they did before.

Facebook going public is a really great indicator of how the world at large looks upon these “hip” companies. They were valued at $100 billion for their (approximately) 1 billion users, or $100 per user. While I don’t use it a lot, I am a Facebook user. I also know that most of Facebook’s value is based off their ability (or potential ability) to monetize users with advertisements or other goodies. I can tell you for a fact that Facebook does not get $100 worth of advertising off of me, not even over the course of one year. I’ve also never given them a dime. Could Facebook potentially convince me to give them some money? Yes, I suppose anything is possible — though highly unlikely, I don’t care nearly enough to pay them directly for the service.

I’m looking at the FB ticker symbol right now and their stock is currently valued just over $31 a share. The high value mark is just under $42 a share. For a company who went IPO at $38 a share, this is not particularly encouraging. Remember when the GOOG went public? Their shares promptly jumped a massive amount. Google also has several discernible products, even if they are an advertising company. Facebook’s product is you (well, and me), and that product is fickle.

I don’t want Facebook’s stock to fall flat on its face(book) because that’s bad for the tech sector. On the other hand, I think it’s good to have a tech IPO that isn’t a runaway. It is my hope that Facebook’s launch has let some air out of our tech bubble. Common sense is the name of the (long term) financial (success) game.