Valuations!!!

Dot-Com Bubble of 2000 springs to mind for many people when we consider the ongoing valuations of a number of tech companies. With sites such as Facebook which is ranked second most visited site on the Alexa rankings do we think that the valuation of $85bn (based on the sale of 100,000 shares on SharePost) is justified seen as it is supposedly nearing 750m users.

If we consider this to be growing and the recently reported drop in figures in some area's of the world to be just a minor blip.The increase in users of the internet world wide will flock to social media as they go online should see the company hit 1bn users. The site is a daily destination for a large number of users and Facebook has data on its users that other companies could only dream of knowing. So Facebook can innovate, develop and bring new features to market very quickly which if managed properly I think we could see them beat Google to that number one ranking (unlikely but possible if Facebook improves services).

On the other hand companies aren't about just rankings and users because in the long run they need to make a profit with their users. Many of these companies are asking for more funding and these are inflating valuations, at the end of the day these companies need to give value to their investors. So obviously investors are taking the risk because they don't want to miss being part of what could be very profitable. (Groupon reported value $25bn)

When I last wrote about Myspace I spoke about my thoughts on redeveloping the product and didn't mention the price which I feel now is better suited to the company. The company which now has the real opportunity to look at the gaps in the market and what their users want but don't have from a different perspective. The £22m price paid for a failing company which was once valued at $580m and still couldn't compete with Facebook. could we see this happen again to some of our other giants? I expect so...

To be continued, Let us know what you think...