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Tech Bubble? Maybe, Maybe Not

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Re: Tech Bubble? Maybe, Maybe Not

#3

Post by DigitalSea »

Surprisingly this is a great article about the speculation of there being another tech bubble. I wasn't expecting there to be actual metrics and charts, I have become too used to people voicing their opinions without backing up their claims with actual data. I am still on the fence about whether or not we are entering a bubble (or if you believe some people already within one). Comparing metrics to the early 2000's is one thing, but I think the landscape is dramatically different than it was in the early 2000's to the point where maybe you can't make a direct comparison to what happened.

We are seeing highly successful and VC funded companies like Snapchat and Twitter achieving high user rates, but failing to monetise their userbase. Herein lies the problem: these companies are being valued at billions of dollars because of their VC investment, but they're not making any money (at least not enough to make a profit). In comparison to companies that are making profits, but might only be valued at a fraction of Twitter or Snapchat. Surely this has to have consequences even if they're not on the scale of what we saw during the dot-com bust of the early 2000's.

Maybe we're not in a tech bubble like we saw in the nineties, but I think something is definitely going on. Just because people aren't losing retirement funds due to buying stock in an IPO'd tech company that dies doesn't mean a bubble hasn't formed in other areas that necessarily don't affect your average investor. Like many things involving historical and financial data, nobody knows what is going to happen tomorrow or in 6 months time. We can speculate, but honestly, nobody knows: that's both the beautiful and destructive nature of finance.

VC's are throwing money at these companies that are burning through more money than they are making. Having to go through multiple rounds just to keep the lights on. I don't see how that is sustainable in the long-run, at some point you have to start making money right? It seems the approach most companies take these days is to try and get as much investment as they can and when they reach the point where they've given up X percentage of their company to venture capitalists they either have to IPO or close down.

One thing that is definitely different from the nineties is we aren't seeing startups host ridiculously expensive launch parties and events as much anymore.

Re: Tech Bubble? Maybe, Maybe Not

#5

Post by michaelchisari »

DigitalSea wrote: post #3

Surprisingly this is a great article about the speculation of there being another tech bubble. I wasn't expecting there to be actual metrics and charts, I have become too used to people voicing their opinions without backing up their claims with actual data. I am still on the fence about whether or not we are entering a bubble (or if you believe some people already within one). Comparing metrics to the early 2000's i…

Maybe we're not in a tech bubble like we saw in the nineties

That's what I think. Not repeating the same mistakes doesn't mean we're not making new ones.

Which means the bust will also be different, for better or worse.

Re: Tech Bubble? Maybe, Maybe Not

#7

Post by ghaff »

DigitalSea wrote: post #3

Surprisingly this is a great article about the speculation of there being another tech bubble. I wasn't expecting there to be actual metrics and charts, I have become too used to people voicing their opinions without backing up their claims with actual data. I am still on the fence about whether or not we are entering a bubble (or if you believe some people already within one). Comparing metrics to the early 2000's i…

It also strikes me as an interesting question how much collateral damage will result from bubble deflation if it happens. Other events in 2000/2001 contributed (post-Y2K, 9/11) but dot-bomb also had a big effect upstream because all those startups were pumping crazy money into big IT suppliers like Sun, EMC, and Cisco. So the bubble bursting had huge ripple effects. I'm not sure a burst bubble that's mostly about outsize valuations for web startups with no business models today would have the same sort of impact.

Re: Tech Bubble? Maybe, Maybe Not

#8

Post by mdev »

Startups will eventually have to stop giving out free VC money to acquire users. I think the user acquisition cost currently is way to high. Companies give away between $10-$25 (or $1000 for new drivers on Lyft) just to try their service. There are no major differentiators between many of them apart from free credits. Companies race to acquire users like how Groupon did in the coupon business when tens of clones popped up within days in multiple countries. There are many examples of these - I have no reason to stick with one service or have brand loyalty. As long as the service is within reason the cheapest one is the one I'd use.

At some point the incentivizing would stop after burning through a lot of cash - to show profits. At that very moment some other startup could begin giving out lots of free credits and users could very easily move.

That's when things could potentially come crashing down.

Re: Tech Bubble? Maybe, Maybe Not

#10

Post by timepiece »

mdev wrote: post #8

Startups will eventually have to stop giving out free VC money to acquire users. I think the user acquisition cost currently is way to high. Companies give away between $10-$25 (or $1000 for new drivers on Lyft) just to try their service. There are no major differentiators between many of them apart from free credits. Companies race to acquire users like how Groupon did in the coupon business when tens of clones popp…

near perfect competition is good for consumers

near perfect monopoly is good for corporations

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