Google bought YouTube for $1.65B when YouTube didn't have business model. It was critiqued a lot because of this, but it established Google as a dominant player in video space and it's ripest fruits might be seen in coming years when media consumption moves more and more to mobile.
I grant that $1B sounds a lot for Instagram and it is harder to see similar commercial value in photos than in videos.
My personal take is that in addition to friend connections, already posted photos could be the strongest lock-in for users that Facebook has against future competitors.
Trust me, Youtube is very profitable. Major multi-national brands have to pay $100,000's in Google Adword purchases to have their own branded channel. And if you want to change the look of your channel? Pony up another $100K.
YouTube just recently turned profitable in the last two years. It was hugely unprofitable with an unproven business model at the scale at which it was bought.
yeah, and Yahoo bought Flickr for hundreds of millions. And Flickr never became a profit center for yahoo. Now, Yahoo is laying off thousands of workers, and is close to dead poool, because of all its malinvestment in web1.5 (flicker, geocities, delicious, etc).
Video has a higher value proposition than photos. Look @ how hard flickr has struggled turning photos into a sustainable business model.
I'm comparing apples to apples. You're comparing apples to oranges.
You could have said the same about Yahoo acquiring Facebook itself for $1 billion, if that deal had happened. It's clear now who would have got the better deal there.
Certainly that doesn't mean every large acquisition is justified (e.g. Bebo) but it also means you can't just automatically apply the "company X has no clear business model today and so shouldn't have been bought for Y" argument to every such acquisition either.
I'm not convinced Yahoo buying Facebook for $1 billion would have been a good deal for Yahoo. Yahoo never would have been able to make Facebook nearly as successful as it is today. I have my doubts Facebook would be worth even a $1 billion today. Yahoo has an awful track record of making the worst out of their acquisitions and I don't see how this would have been any different.
I am actually wondering if the value was too low. They are crossing the chasm so to speak and moving toward mainstream very quickly. I don't know where they would have ended up, but if they could have negotiated an upround with the founders and VCs taking some cash off the table it may have been a better move.
I fully understand that if I had a $1B offer for a company that I would literally be sick turning them down, but the potential was there for something really big. If I could keep going with $10m in the bank, I would like to think I would try.
Groupon is a ponzi. They need money from new groupons to pay out past groupons. This is why they are constantly buying out smaller companies for new markets, and getting into higher end groupons. If the new money coming in is less than the money payed out to previous groupon, the companies collapses, just like a ponzi.
As long as they can make the company look healthy in the near term (accounting tricks), they hope investors won't notice the medium-long term liabilities, or the flow of funds necessary to keep the company afloat, but by then insiders would have sold out the bulk of their positions, and someone else is holding the bag.
Groupon will signal the bursting of web bubble 2.0, and will drag down the Facebook IPO. And if the Facebook IPO falters, silicon valley hits the skids, because everyone in Silicon Valley is in that play. Everyone.
I think that a) Groupon will take longer to blow up than that, and b) people will be happy to write off the daily deals sector as something pretty much unrelated to Silicon Valley. Groupon is in Chicago, Living Social is in DC. They are marketing companies, not technology companies.
Now if something else fails big, I'm sure people will see a trend. But I don't think Groupon will be enough.
If Groupon sacks most of its sales staff, it might do OK.
Groupon is doing an Amazon-style land grab. They want a fat book of customers (both businesses and clients - it's an open question which are the real customers). They are willing to blow a huge amount of investor capital doing this.
Some businesses will lose big doing Groupon campaigns. Groupon doesn't care, as long as a certain percent of businesses figure out how to do well with them. For now, they are willing to burn a few customers.
Andrew Mason is basically a newer version of Bernie Madoff. Except Andrew publicly runs a ponzi scheme... AND overinflates share valuation to pump & dump his shares.
LOL.
If he and his CFO aren't in jail over this... I don't know what! There goes investor confidence...
Facebook is extremely overvalued. You cannot rationalize a 80B market cap for facebook on annual revenues of 2-3B, considering how Zynga's business model is faltering (social gaming fad waning), and a large part of facebook revenue comes from Zynga.
Also, Tumblr is becoming the new 'it' social network site. And Google & Apple & Amazon will continue to launch social products to erode market share (measured by social activity, and not eyeballs).
Lastly, since common folk are pulling out of equities, and the US economy is following Japan's deflationary path, after her property bubble, P/E should likely converge to a value of 8, which was seen in Japan.
Therefore Facebook @ 16-21B is a better valuation, but still overpriced in a deflationary macro environment.
The float is too thin to short. That is why all new web 2.0 IPO have thin floats. It's easier for larger stake holders to push the price around, and sucker in ma & pa, and momentum traders. But if you look @ ICI data, common folk are getting out of equities. If you own risk in this market, going into 2012, you are a fool. There's a high probability of a financial collapse in Q1 2012.
or you can say that investment bank client couldn't find dumb money to offload their shares to on opening day. And Pincus & insiders were probably fcking over investment bank clients by offloading their shares.
Investment bank clients are gonna be pissed that their P/L is already negative, day one, because of Pincus offloading.
A large part of Reddit winning was Kevin Rose fumbling while CEO of digg. Reddit had open sourced its code by then, and Digg didn't even bother adding some of the useful functionality.
I really expected them to copy user-created subreddits. They'd had a critical mass of users at that point, so whereas it took a year or so of me seeding new communities, doing house ads, and generally hustling subreddits -- they could've been up and running with a myriad of healthy communities.
It's part of the built to flip mentality of the VC world. Look @ Groupon for godsake. The sustainability of its business model is dubious, but they still rushed the IPO, so they could flip it to ma & pa. But ma & pa aren't buying, so Investment Bank clients that got in during the roadshow are unloading en mass, and has sunk the share price below the IPO price, despite the low float.
web VCs fund companies they believe they can flip. It's also why they are biased towards late stage funding, since they have a higher chance of flipping over their positions.
This buy was just another way for connected Silicon players to cash out on the facebook IPO, since the IPO window for web 2.0 is closed.