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Discussion in 'The Front Room' started by Wij, Feb 23, 2011.
Is The Second Dotcom Bubble Underway? Ten Telltale Signs | paidContent
I don't really have much an idea about how you make money from internet sites.
I know they are somehow worth millions of pounds for no apparent reason but correct me if I am wrong, doesn't any real revenue come from marketing, advertising or the sale of goods? For example, I have absolutely no idea how Facebook is worth so much money, they don't charge you for anything and if they did people would stop using it. Unless they sell certain information on to other companies (which is surely limited by data protection/privacy laws?)
Having 100,000+ people look at your website a day cannot make you any money unless you either charge them something or advertise something to them surely? With traditional advertising coughing up its last breath I can't see there being much point or way of making money in most websites.
"OMG buy this naow!" doesn't work any more.
Facebook sells advertising and if you can reach 500 odd million people then it is worth spending the money! How it is valued...well that depends on the Facebook balance sheet...and it's potential for drawing in more revenue!
Advertising and data harvesting yes. That's what Facebook and Google make money from.
The spot prices for both those things are gonna be highly volatile though. They should all get into the protection racket like Apple
It's only a DotCom 2.0 if companies are valued disproportionally to their actual revenue and profits, however there is a reason why Facebook were recently valued at $50 billion.
Facebook's leaked financials show possible $1B profit in '11
Now a company like Twitter on the other hand, they've been valued at $10 billion with almost no profits to speak about.
Facebook is making shitloads from advertising, although analysts don't think they're making enough (e.g. it'll probably be about $2 a customer this year - but that's doubled from last year). The valuation comes from the expected future earnings, either from revenue or from a sale to someone else (e.g. Microsoft). A lot of social sites make fuck all money though (e.g. Twitter), and the valuation is a speculative punt that they'll be able to "monetise" (terrible word), those customers in the future.
There are lots of people who think advertising is dead; this is blatantly not true (its not even true for display advertising), its just where the ad money is spent is shifting, with Google taking the lion's share of everyone's online budget, and now a significant proportion of everyone's overall budget; e.g. in the UK companies are now spending, on average, about 30% of their overall advertising budget online, and Google are getting about 60% of that 30%, (in other words, 18% overall, which is more than ITV). Facebook are gaining share, but not really at the expense of Google, and the overall online share of all advertising is getting bigger and bigger.
So, to answer the original question; yes, there are a bunch of overvalued dot coms out there, but there are 2-3 juggernauts who underpin the current boom (last time it was really only Amazon who came out of the crash stronger).
What percentage of those adverts are for other .com2.0 services though ? If it's significant then a bit of a house of cards style shitola could occur.
(not a rhetorical question, i don't actually know)
Say you devlop a Facebook app, don't they charge for you to 'host' it on their site? If so, there's more revenue for them.
Dunno, but there is a huge parasitical structure to the current boom; pretty much all the new development ideas rely on Facebook, Apple and/or Google distribution in some shape or form (take Zynga as an example for Facebook, Rovio for Apple). Google and Facebook are probably "too big to fail" at this point; barring regulatory intervention (possible with Google). Apple I'm not so sure; the latest silliness from Apple about app charging could definitely bite them on the arse and deliver the apps market to Android on a plate*, but more importantly it shows that with all these companies you're making a deal with the devil; their business practices are very one-way, and they can (and have) pull the rug out on you at any time.
(*example, I've literally just come out of a meeting about a mobile version of a site I have responsibility for, and we're no longer prioritising iOS because of Apple's new rules, its just uneconomic for us).
So far this is purely speculation based on these companies going public. So far the damage risk is limited to private investors.
If idiots start buying into these inflated companies, then I'll start worrying. It'll all end up as a huge pyramid scheme.
If you think it's a bubble, buy now and sell soon.