Sunday, June 12, 2011
A social whirl
After years in the doldrums, the IPO market for technology firms has suddenly sprung to life again with a number of web outfits in pipeline such as Groupon. Shortly after Linked-In's stunning debut, web companies from China and Russia are also rushing to list on American exchanges. Yandex, Russia's largest search engine, floated its shares on the NYSE with price soared by more than 50% ont he first day of trading. Renren, a Chinese social network with a recent listing in America, has even higher value per user than Facebook. Compared with Facebook's over 500 million users, Renren only has 31 million. However, its value per user exceeds USD165, at least USD10 higher than Facebook. Do we see these social-media firms more champagne or bubbles?
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Glad you brought this up, Bin. I've been wondering the same thing since talk of the new tech IPOs started heating up. For what it's worth, I'm in the "bubble" camp - I think there's a lot of value to many of the tech companies going (or about to go) public, but I also think that a lot of them are overvalued. For instance, LinkedIn's stock has already fallen over 20% since it first went public.
But the one I really wonder about is Facebook. I poked around and found some estimates for Facebook's revenue projections (using ad sales figures as a proxy) and even if we go with the most aggressive, Google's sales figures are still five times that of FB...but FB's higher-end valuations put Google's market share at only 3.5 times FB's valuation.
Now, ad sales probably won't be the only revenue stream Facebook uses, but that just brings me to the biggest question that I have: if these new tech IPOs aren't overvalued, where does their value really lie? What makes Facebook worthy of the pricetags that are being floated? Maybe it's the wealth of data that marketers are salivating to get their hands on? I really have no idea, but curious what you and others think.
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