There
were three big news items this week that hit on the same overarching note:
Are we in a tech bubble or tech boom?
It
was recently reported that the S&P500 has hit records highs this year
regardless of the fiscal and political meltdown in Washington. Tech stocks saw
a surge in the past three weeks due to beating analyst estimates and showing
record revenue gains as the 3rd quarter came to a close. Even companies who lost their luster a few
years past saw shares rise as 2013 seems to be the year of the tech resurgence.
Another
big win came to one of the last brand-name social media company that’s still
private, Pinterest. They were just infused with $225M in round E investing,
even though the company has yet to generate mass revenue. The company is now
worth an expected $3.8 billion, which basically pushes them out of ever being
acquired due to their large evaluation.
Finally,
Snapchat also received an extremely high evaluation of $3.5 billion. Remember,
this is the same texting startup that put “sexting” officially in our lexicon. It
was also reported that Mark Zuckerberg Facebook was also reported to have offered
Snapchat $1 billion to buy the company outright.
What’s
shocking about this is how some of these companies have yet to really understand
what type of revenues they can make. It seems yet again that they’ll probably
default to “ad revenue” or “mobile ads”. This seems short sighted and a bit
risky given that it’s not always a proven method to generate value. Speaking of
value, people have put so much of it—literally and figuratively—in these companies
that most feel overvalued without looking at the financials. It may be time to
step back a bit and try to understand what’s going on in the world of tech and
revenue generation. Government impasse, no revenues, and sexting… are we in a
bubble? #yes.
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