Last Time It Was This Crazy, the Stock Market Crashed(wolfstreet.com) |
Last Time It Was This Crazy, the Stock Market Crashed(wolfstreet.com) |
Amazing what happens in 10 years when worldwide smartphones go from a tens of millions a year (2004) to over a billion a year (2014). Apple has 130 billion in cash sitting overseas with nothing to spend it on. Microsoft has 90 billion. Google has at least 30 billion. Facebook has over 10 billion cash (domestic + foreign).
So yeah. Startups are going to be valued at over a billion. Because there are more than a couple of potential buyers who can spend that in cash.
My rule of thumb is that if you can get 100,000,000 users you can sell for $1,000,000,000. You don't even need revenue! Crazy, but that is a shit load of users. How many 2000 dotcom companies had a hundred million users? Hell did even Google have a hundred million users back then?
> My rule of thumb is that if you can get 100,000,000 users you can sell for $1,000,000,000.
Lots of users does equal success because you only have to monetize them at low numbers. But the number of 100M user companies is still very few.
> Hell did even Google have a hundred million users back then?
They had a dominant search position, so their percentage penetration of internet search was huge, maybe higher than it is now because China and its wall garden hasn't yet arisen.
You could have 6 billion users - it doesn't mean anything unless you can monetise them.
And nobody can come up with a smarter way than advertising? It's the only thing to fall back on because of how the companies start. If you get 100,000,000 users and charge them nothing they will leave you if you try to start charging. They may get pissed about advertising but that will fade. I would love to see more companies focussed on monetising from the start.
Whatsapp seemed to be doing a pretty good job of that (99¢ per year) but they took on a ton of funding so had to sell. I understand the mentality of take all the funding you can get ('free' money, why not?) but nobody seems willing to struggle for a bit. They want high paid employees with lots of nice perks from day 1.
I used to run an abandonware game site when I was in high school during the first dot com bubble, and we would get paid $100-300 per month from advertisements on the site, which paid for us to run it.
After the dot com bubble crashed, we were getting paid $20-30 for the same ads and more traffic. It forced us to take the site down, as we didn't have enough revenue to fund it anymore (we kept the ring up though, it's still in operation today, probably with some of my code still under it's hood: http://abandonwarering.com).
Here's my question: Let's assume this is a second bubble for the sake of my question. After that bubble crashes, if advertising revenue tanks with it, how much does that tear into the profitability of these companies that depend exclusively on advertising?
I'm not a gold bug, but I remain highly concerned about the heavy burn rates and artificially high private valuations in the industry right now. Something I've learned from experience is that if it feels too excessive, it usually is.
30 USD per user is/was published sometimes.
The real reason WhatsApp were worth so much is they started to look like an existential threat to Facebook. Similarly for Instagram and SnapChat. Uber will in the long run to Google.
One of the best get rich startup models today is to create something where it looks like you'll take away the core raison d'etre of another entrenched service, and it will radically inflate your value.
I still haven't heard any convincing reason why "this time it's different".
When a company is listed, the stock price better reflect the actual market value of the company (otherwise a dot-com bubble happens). However, if rich VCs like to bet on startups, that's expected to be a high-risk investment.
Well, technically VC money is people's savings, usually parts of pension funds I believe.
Even Snapchat doesn't sound so stupid - it may never make any revenue, but having such a crowd of loyal users can bring a lot of cash to many companies who have already figured out their monetisation (Apple, Google, etc.) so they will be just buying a huge market. And they have a lot of cash to pay for what they buy, and sometimes they do actually buy. So people investing in Snapchat on these seemingly extreme valuations are likely not that stupid, or subversive.
I read about the big investments back then, but to me, they never became more than a headline. Never a place to visit. More like "a place that I should visit, sometime in the future". It was full of promise, not of value.
Though now, I use and actually pay for many services. I feel like they add a certain value that, back then, nothing did.
Now, a billion dollar is a lot. But A billion people is too.
If he won't do it, someone else should. It was a lot of fun back in Crash 1.0 days.
I mean come on you can develop awesome software without having a fancy office, nice furniture and a super high salary.
Take me and my friends for example. We love building stuff and work for all our products in university or at home. Also we're doing it for, what, like 400$ a month working 20-30h...
I wonder what will be the trigger that sets off the selling frenzy this time round?
VC ecosystem is insignificant. Easing will stay until its results are aligned with leaders priorities.
Just because there are repeated warnings about irrational exuberance, and we haven't had a correction YET, doesn't mean that there isn't irrational exuberance.
> When do people start to analyse what's really happening instead of saying "according to what we experienced 10-15 years ago, it should be way worse than it was back then."
I don't think it needs to be way worse that it was then. Corrections are different every time.
> There are reasons why the start-up market is still growing but wasn't in 2000.
Define "start-up market" and "growth", because in 2000 prior to the crash there was a ton of money going into startups, a ridiculous amount. It was only after the crash that things went sour.
If their market crashes and individual wealth drops, they wouldn't be able to pay their mortgages, which I guess would be a problem for lenders in the US?
Lots of leaps here, but I can see a connection if his/her facts are right.
All what's left is digits on screens and papers.
I know it's anecdotal, but the thing that makes WhatsApp so great for me it's that "it just works". I have it installed on my iPhone 4, and compared to Facebook's app is hundreds of miles ahead. Until 6-months or so ago the FB app needed 2-3 or minutes to actually open and redirect me to the private messages window, after I had received a notification. In one case it took 5 minutes (or even more) for the messages I was writing in the FB app to reach the person I was talking to, making for a very awkward conversation. And forget about trying to send images. In the meantime they decided to force the use the Facebook Messenger app, which cannot be installed on my phone's OS. I'm probably supposed to buy a new, expensive phone, which I would have if apps like WhatsApp hadn't existed.
WhatsApp, Instagram, and SnapChat are valuable because they have users. There are a million ways to monetize users once you have them, but it's hard to get them. Google, Facebook, and others are large, humming machines that squeeze money out of users, but WhatsApp, Instagram, and SnapChat are not. The latter three companies are valuable because they can be fed into the larger machines that already figured out how to monetize.
Unrelated: Uber certainly is a threat to a lot of companies (USPS, Zifty, DHL), but I can't see the Google connection. In fact, Uber and Google recently became partners.
If anything, Google is a massive, existential threat to Uber because it's working to perfect self-driving cars.
Even if that's a typo and you meant United Parcel Service (UPS), even if we examine DHL independent of its parent company, they are heavily invested in international freight and supply chain management. I see no great benefits there from the ability to summon a cargo plane on a whim with your phone, nor from handing it off to someone with no formal training/license/qualifications.
The software features which make Uber and Lyft a unique experience will eventually become commoditized.
What happens to companies like Uber when the barriers to entry are so low that margins are non-existent?
Additionally, Google's self-driving car technology that it's developing would be best-suited to something like Uber or Lyft. The self-driving car is (at least at first) much better for an on-demand usage model, rather than an ownership model.
I disagree. The real reason were that part of their userbase was using Whatsapp on feature phone. It was as much a tech acquisition as a userbase acquisition. To get to the point Whatsapp was Facebook would have had to, develop the tech _and_ attract the users. In the end, buy whatsapp was faster, less risky (no guaranty they would have been abble to steal/convert the whole Whatsapp userbase) and probably cheaper.
For all the menacing Whatsapp can pose to FB, advertisement is a much larger market, with a clear path to profitability. The problem is not simple, but not outlandish either.
Yet, candidates such as Bing and, at one time, Yahoo, continuously fail to properly serve this market.
My pet theory is that money supply and inflation no longer have much of a correlation. In fact, they might never have.
But contrary to sibling poster, economists have known for many decades that it is only a weak correlation and plenty of other forces are at work. The weak inflation resulting from QE was predicted by mainstream economics and does not come as any surprise. This is nothing specific to the US economy - Japan and the EU are similar real-world examples if you don't care for the economics and the modeling.
Japan is a fine example actually - 15 years later, Japan is, as expected, still not seeing some kind of phantom, invisible-hand "correction" causing massive inflation.
They have stronger correlations in small country economies. The US economy is sort of uniquely positioned in the world and that makes its exception and more complex. I think that with the US economy is that the repercussions of actions are delayed because the interconnections slow reactions down -- although this also lets things get unsustainable before the correction actually takes place.
2) Uber will use self-driving cars, probably exclusively as soon as it's legal.
Uber wants to be the internet of the physical world. With the internet, information could travel anywhere with the tap of a finger. Uber wants the same reduction of friction for objects and people.
The problem for Uber is it's already easy to poach drivers from Uber. Drivers don't care if they drive for Lyft or Uber because the payouts are pretty similar. I've met drivers who switched between both.
When cars drive themselves, Uber will have to become even more competitive to stay on top. The cost of building an Uber-like fleet will be no more than buying the hardware.
Remember how hosting companies proliferated in the 90s and early 00s? Until AWS and similar PaaS options, the hosting space was incredibly fragmented, and the margins were awful. That's what Uber has on the horizon.
Providing capital to build a replica of an existing proven business model is easy, you already provided the example: gajillions of hosting companies providing physical hardware for peanuts because a few people had proved the business model worked. The cost of the hardware is amortised over its expected lifetime and any bank will provide the loan.
If this is Uber's future then Travis must be looking to exit before that...
Sure, an Uber driver could charge less for labor, but given that the cost of operating their vehicle will inevitably be more expensive per delivery I expect there is probably no price point at which they can realistically compete.
Perhaps Uber drivers have a path forward in niche delivery services: food, very time sensitive deliveries, rerouted deliveries, etc. But in those areas they will need to compete on quality, and the market for more expensive, higher quality deliveries (while possibly extant) cannot be large enough to represent an existential threat to a company the size as UPS.
Beyond this, I'm curious as to whether it's even in UPS's best interest to continue to service the last mile.
Both UPS[0] and FedEx[1] already have services wherein they partner with the USPS specifically to avoid servicing the last mile. Outsourcing to better/cheaper/more efficient last mile service providers might eliminate a lot of UPS employees and revenue, but the last mile is incredibly expensive to operate. Is the last mile service really a major source of profits when compared to their highly efficient long distance operations?
[0] http://www.ups.com/content/us/en/resources/track/sp_definiti...
I wonder to what degree that would happen again. I think percentage wise it is likely to be less severe than last time, but it could still be significant.
We have no real data form Google on pre-bubble/post-bubble advertizing as they were not advertizing at that time. But it probably would be a horrible hit to them this time around -- even 30% correction would be severe.