I call bullshit. This article is heavy on speculation and light on (if not absent of) actual analysis. Tell us, beyond valuations you disagree with, what fundamentals are unsound here. Are businesses IPOing despite being unprofitable? Are companies burning cash and garnering additional investment despite no steps toward profitability? What, exactly, other than a sneaking suspicion that Facebook might not be worth it's valuation? Clearly some people, the people buying Facebook stock, disagree with you. Why are you right and they're wrong?
The New Tech Bubble
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Re: The New Tech Bubble
#22They're hedging. They even go as far as to say "you heard it here first". I'm sure they would rather be in a position of being overly cautious than have people lose faith because they didn't report on a coming bubble.
In terms of actual analysis, they're falling into the trap all other journalists seem to be by just repeating the bubble rumors that are floating around. You'd think Economist could come up with more substance for their argument.
Re: The New Tech Bubble
#23I have not really studied this issue in depth, but from what I can tell most of the increasing investment activity that they are referring to is occuring in the private investment world - not on stock markets.
With that said, it seems that it would be difficult to call this activity a "bubble". "Bubble" in the popular nomenclature are typically used to refer to developments that can have widespread consequences when they "pop" (Re: the housing bubble, the credit derivative swap bubble, etc, etc).
There has been a lot of private investment activity in the tech world recently, but I think that it would be fear mongering to refer to this activity as a bubble. The Internet in general (and the web specifically) is still a relatively recent development. It makes sense that you will see a lot of investment activity in this area.
This same type of thing tends to happen whenever a major technological advancement spurns rapid innovation (Re: the gilded age). It is merely capitalism at work - not necessarily a bubble.
Re: The New Tech Bubble
#24I think it goes back to the learnings from the original tech bubble: companies with a real business plan survive, those with a nebulous product don't make it. For example: Amazon was a rising star during the late-90s tech bubble, and it's still around today. And it's very much a player in the tech space. How many of us use AWS? Google has a solid business platform and has definitely made it by all measures. Netflix i…
I don't think Amazon, Netflix, and Google are the companies people are referring to when talking about this new bubble.
Poster is illustrating how those companies survived the previous bubble thanks to their business models.
Re: The New Tech Bubble
#25I think it goes back to the learnings from the original tech bubble: companies with a real business plan survive, those with a nebulous product don't make it. For example: Amazon was a rising star during the late-90s tech bubble, and it's still around today. And it's very much a player in the tech space. How many of us use AWS? Google has a solid business platform and has definitely made it by all measures. Netflix i…
I don't think Amazon, Netflix, and Google are the companies people are referring to when talking about this new bubble.
Amazon was definitely one of the companies people were referring to when talking about the last bubble, though.
It's hard to predict the future. A bunch of companies that people have thought could never be worth their outlandish valuations turned out to be. And vice versa.
Re: The New Tech Bubble
#26I call bullshit. This article is heavy on speculation and light on (if not absent of) actual analysis. Tell us, beyond valuations you disagree with, what fundamentals are unsound here. Are businesses IPOing despite being unprofitable? Are companies burning cash and garnering additional investment despite no steps toward profitability? What, exactly, other than a sneaking suspicion that Facebook might not be worth it'…
Agreed. The writer gives credit to Facebook, Groupon, etc. and then throws in at least 10 phrases of hedging/qualification and then warns us of the next, as yet unseen, wave of startups that, it blindly guesses, might just be, perhaps, possibly, a tad, just a bit, overvalued. Thanks for the tip, Economist. Let us know when you pair some facts with your sanctimonious speculation.
Re: The New Tech Bubble
#27I think a lot of the responses here call out some definite omissions in this article (detailed analysis, the preparedness of certain companies, etc.). All of these points are valid, however, I don't think the concept of another bubble should be entirely dismissed. The thing to pay attention to does not revolve around the major companies like Facebook. The focus, rather, should be on the smaller companies that seem to get ridiculous valuations and investments for seemingly cheap ideas. Yes, Angry Birds is great but millions of dollars in investments? The bust will come from mindless investments like these. People will get bored with this game or that app and any dev that can't keep up will find themselves having to answer for insane investments that went nowhere. Luckily, like some have said, we've learned from the past in regard to bigger web firms, but until recently, "small business" didn't have a large voice in the web. You love the bakery down the street, but are their cookies worth millions? Probably not.
We'll see.
Re: The New Tech Bubble
#28Tech bubble or not, judging companies based on how much finding they raise alone is bad. Put profitably first and you shall survive any disaster. I don't think we are in a bubble because people who invest usually consider profitably over potential to flip to the next sucker. Investors I've spoken with seem to be wanting in for the long haul.
Re: The New Tech Bubble
#29This may be a private tech bubble though. To me it don't seems like tech stocks are too inflated compared to the revenues we can see. Facebook may be overvalued, the Skype buy was very expensive, VCs invest like crazy, but all of that is private investment. Does anyone here see a risk for the stocks also?
Where do you think all the VC and angel money is coming from? Banks and pension funds and investment firms are almost certainly funneling money into these things, we just don't get to see it because it's being done on the private market. The very thing that makes everyone comfortable with this bubble (that it's mainly "private" capital) is the scariest part. Last time, you could mostly tell when grandma's retirement…
Yes, you are right. Good insight, thanks. On the same line, my comment that Skype was a private investment also isn't true, because MSFT is a public company.
Re: The New Tech Bubble
#30I call bullshit. This article is heavy on speculation and light on (if not absent of) actual analysis. Tell us, beyond valuations you disagree with, what fundamentals are unsound here. Are businesses IPOing despite being unprofitable? Are companies burning cash and garnering additional investment despite no steps toward profitability? What, exactly, other than a sneaking suspicion that Facebook might not be worth it'…
Sorta seems like a bubble.. its not the first time its been said.. whether or not I agree with the rationale -- doesn't make the observation or the phenomena any less valid. Or, do we wait for the bubble to burst before anyone can call it a bubble. (I dont know..)