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August 02, 2007

Comments

Joseph Hunkins | Joe Duck

Yup, very perceptive as usual Don...

alan p

Don, it doesn't have to be VC's funding and NASDAQ IPO's - large companies paying very large (irrational?) amounts of money (in cash) for pre revenue companies gives exactly the same market signals.

Don Dodge

Alan, Good point. There have been a few acquisitions with prices that defy any reasonable valuation model. But, not so many that it feels like a bubble...at least not to me.

The thing about acquisitions is that it takes several years before you really know if the price was reasonable or not.

Some people may have thought News Corp was crazy to pay $580 million for MySpace a few years ago. MySpace is probably worth 10 times that now based on the advertising revenues they are generating.

YouTube for $1.6 Billion may turn out to be a bargain in the long run. My guess is that it will not, but it is too early to tell.

alan p

Don, I agree re your view on those two acquisitions. Re the "Bubble" thing I pulled some stuff together on the topic and also compared it to an old fave of mine, the Gartner "Hype Curve" (Sorry, its a long post and its on our blog broadstuff over here)

http://broadstuff.com/archives/351-Bubble-2.0-or-just-Hype-2.0.html

Net net the signals for a bubble are very strong but SocNets on their own cannot a bubble make, it needs a wider base - could just be a high intensity hype at the mo'.

Edwin Khodabakchian

Great post.

Kaila Colbin

Hey there Don,

Intriguing post as always!

This is hardly my area of expertise, but I couldn't help but put together two articles I read today: yours, which said:

'When VCs start throwing tens of millions at "experiments" and the NASDAQ starts launching IPOs of companies with no profits, then I will agree we are in a bubble.'

and the announcement about Accoona's $80.5 million IPO (http://searchengineland.com/070806-103549.php):

"In the first quarter of 2007, Accoona realized losses of $14.8 million with revenues of $37.5 million."

What's your take on Accoona?

Don Dodge

Kaila, Thanks for the link to Accoona. Losses of $15M in a quarter are OK for a fast growing private company on a path to profitablility. But, is it OK for a public company? I don't think so, but I guess individual investors will get a chance to decide that.

If Accoona does successfully go public that would be one piece of "bubble" evidence.

Lloyd Budd

Though I don't particularly like John Dvorak's politics -- I find him too pessimistic (grumpy) and polarizing -- I find your assertion "he is out of step with the new web innovations, social networking, User Generated Content, widgets, and all the Internet video innovations" ungrounded, but more important unsubstantiated by you here.

If you look at his blog, or listen or watch Cranky Geeks, you will see that he seems pretty darn in step.

Maybe, you are are meaning that he is out of step of the financial context, but that isn't what you wrote.

Your article would be a better read without that ad hominen attack.

Kaila Colbin

Hey there Don,

Further follow-up to our Accoona exchange: http://www.nytimes.com/2007/08/22/technology/22accoona.html

Looks like they might not be able to go public after all... and what a shady background!

Could this be a bit of pressure release, critical for the prevention of bubble expansion and future explosions?

(Thanks to Marc Andreessen for the tip.)

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