What’s the point of railing about Facebook, Twitter, LinkedIn, and Groupon?
Do we once again have a “bubble” in dot-com? Do we have a “pre-IPO dot com valuation mania” underway, centered around companies with questionable business models? That question is being asked a lot.
Now here is an example of a truly solid “dot com”: Google
In contrast to today’s social-media firms, Google has an insanely great business model. The made a fundamental invention which is changing the world, and delivers immense economic value. I can see that more clearly than ever, now that i’m deeply immersed in the world of online advertising, and the many micro-mechanical details of Google AdWords, the inner workings of which both illustrates their genius, and is the source of 99% of Google’s immense quarterly profits.
Facebook, Twitter, LinkedIn, and Groupon, as far as i can see so far, have done nothing even close to comparable. In fact, for the first three their business model really boils down to attempting to knock off Google’s Ads – they are “advertising plays”. But really, these firms just operate large websites; their is no fundamental innovation that commands those kinds of valuations. And their traffic doesn’t monetize.
The real deal
Google’s corporate motto is “don’t be evil”. And they live that motto. Their advertising campaigns employ algorithms that drive the ads to deliver benefit to advertiser, consumer, and Google equitably. It is designed to deliver the most value possible to everyone involved. Google does everything that way – they operate their business with good intentions for all parties involved.
Coupon play
Groupon is a different case – it’s a content play – a bit more innovative, but really they are online coupon distributors. Six billion valuation for THAT? I remain skeptical.
Looks to me like Google said no to Groupon, and the VC’s are leveraging the Google discussions to “spin up” the Groupon valuation, supposedly at $6B. They are very good at that, and sometimes it works. Seen it many many times!