
Stop comparing this to the 2000 bubble - DanBlake
http://harknesslabs.com/post/65899842923/ffs-stop-comparing-this-to-the-2000-bubble
======
anon1385
_The most important figure above is that we still have 70% more users to get
online. The ‘internet’ can and will continue to grow exponentially, as more
children are born and more kids start getting there first smartphone._

So in response to people pointing out that the industry is obsessed with user
numbers and not profit (or even revenue) the author gives us an argument about
how there are still a lot of potential new users. The exact same argument was
widely used in 1999. And apparently this shows that things are different from
1999…

Is this meant to be satirical?

~~~
greenyoda
And even if you just go by numbers, it's not likely that technology will be
available to the entire world population any time soon.

As of 2008, 22.4% of the world population was earning less than $1.25 per
day[1]. 870 million people (one in eight) were suffering from chronic
undernourishment in 2010-2012.[2] Even if they could afford smart phones or
internet service, it's not likely that you could sell them a lot of stuff on
the internet, or convince companies that they should pay to advertise to them.

Also, it's the poorest countries that have the highest birth rates. Some
developed countries, like Japan or Italy, will soon have declining
populations.

Companies like Facebook have already picked up all the low-hanging fruit --
the people in developed countries who can easily afford internet access and
smartphones. Getting additional subscribers will only get harder once they
have to start looking to lesser-developed countries for new subscribers. The
era of exponential growth may have already passed.

[1]
[https://en.wikipedia.org/wiki/Poverty#Absolute_poverty](https://en.wikipedia.org/wiki/Poverty#Absolute_poverty)

[2]
[http://www.worldhunger.org/articles/Learn/world%20hunger%20f...](http://www.worldhunger.org/articles/Learn/world%20hunger%20facts%202002.htm)

~~~
Apocryphon
You'd think that would be a capitalist incentive for corporations to act to
better the living standards of the global poor, so they can become potential
customers and consumers of their products.

~~~
adventured
There is. For example, the free market - to the extent it has been allowed to
exist - has done a lot to move China forward in very short amount of time (and
particularly given the disaster their country was coming out Mao's reign).

Several former Soviet countries that were exceptionally poor have made good
progress after the fall of the USSR. Hong Kong was practically a banana
republic at one time, and quantum leaped forward very fast courtesy of
Capitalism. Singapore used to be an irrelevant back-water nation.

You'll find that in most of the worst countries today, there are structural
impediments that make it nearly impossible for the free market to reach the
poorest. Often it's extreme levels of corruption, backed with violence; other
times it's very protracted regional warfare (eg in central Africa); and other
times it's a mixture of cultural and bureaucratic as in parts of India.

[http://www.foreignpolicy.com/articles/2010/02/22/africas_for...](http://www.foreignpolicy.com/articles/2010/02/22/africas_forever_wars)

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ChuckMcM
I agree the call for 'bubble' does get annoying, but I also note that you can
be 'over valued.' The appetite for stock (or investments) in non-profitable
companies (so called 'ground floor' opportunities) is (and perhaps always will
be) insatiable.

But I think the bigger thing going on here is capital chasing something other
than a 1% return. Consider you have $100M sitting around. You can take 2% of
that ($2M) and 'angle invest' $75K into 24 different 'startups' and with one
"winner" exit with a payback of $7.5M (100x return on 75K) and have your
overall portfolio growth for that period be 5%.

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rgbrenner
pretty weak argument. 'This isn't like the 2000 bubble, because we have more
internet users now'?

If you really think there's nothing wrong with tech valuations, please show me
ONE company in another industry that has no revenue and 16 employees, yet is
worth $3-4 billion (Snapchat)

~~~
seiji
It's proto-singularity economics. We have no reference frame for what
something is worth when a billion people use it and it only takes two people
to run it. Even with no revenue, it's worth _something_ , right?

Imagine when one person can create a platform 90% of humanity relies on. What
is that one person worth? What if that product has no revenue because the
owner can extract all value on-demand by extorting/blackmailing The Man at
will based on collected personal information?

~~~
rgbrenner
This is the same argument that was used in the dotcom bubble -- profits don't
matter because tech is different.

The fact that it's being trotted out again as justification should worry you.

~~~
seiji
But, tech is even different-er now.

Go back to 1999 and build a website supporting a million concurrent users. How
much hardware do you need? What are your fixed costs? What are your
engineering costs? How do you even market your thing?

Now do the same today.

What's different?

~~~
yongjik
The hardware cost is low, as is the barrier to entrance. And the users'
expectation is higher.

To attract today's users, you still have to be better than your competitor's
website. The fact you can easily build a website for millions doesn't mean it
will actually see millions of visitors.

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InclinedPlane
Of course there's a bubble. Of course it's not the same as the 2000 bubble.

Today online businesses are very different than in 2000, the sheer size of the
market and the industry is vastly different. The cost tradeoffs are also very
different. And, as always, bubbles are about psychology, and the psychology is
different. But the idea that there aren't many vastly overvalued companies out
there is difficult to swallow. There are many over hyped corners of the market
(like social) and many valuations that only make sense if the companies are
run by clairvoyant business ninjas (which, inevitably, few are).

Over the next 5 to 10 years we'll see plenty of highly valued companies
crumble and be revealed as mostly hollow shells. And we'll see a few companies
that don't seem to make sense succeed even so. All of which is fine. Nobody's
forcing anyone to invest in any of these companies. And the good news is that
the dot-com industry is big enough and diverse enough that, unlike 2000, it
can survive plenty of big failures and still keep going.

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gngeal
Yawn, is someone calling social networks "the tech sector" again? Yeah, right,
because material science and industrial automation technology and others are
obviously agriculture or something.

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nmcfarl
When people start writing articles about how "This isn't a bubble" \- it
probably is.

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VLM
The population of CA is about 80 times the population of Las Vegas. Therefore
if Las Vegas had a real estate bubble in the past, California cannot be having
one now, because its bigger. Or something like that.

Two diagnostic indicators for a bubble: Graph PE ratio and its friends, and is
there any monetization strategy presented other than greater fool theory?

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tehabe
I guess in 2007 everybody thought that the housing market will never ever
collapse and the raise will continue forever. People, it won't.

And neither will this growth.

It has nothing to do with the size of the market or the number of potential
users. Hey, if you say it like this, in 2000 were a lot more potential users
than today, because of less people on the internet.

~~~
DanBlake
Thats a pretty blind way to look at this. A shopping site launching in 2000
had a fixed potential audience of X and a MAXIMUM revenue of Y.

A shopping site launching today has more than 10x the audience. If you want to
discount that, go ahead.

~~~
tehabe
Even 10x is a finite number. Growth is not unlimited it never was and never
will be. That is the point I was trying to make.

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bayesianhorse
I call this phenomenon "fishing for prophecy".

Post a couple of prophecies, with "evidence" of course! Maybe some
contradicting ones under different pseudonyms. Then, when the fecal matter
eventually hits the rotary impeller, you can say you foretold this.

Makes you look incredibly smart...

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dimitar
I found'there first smartphone' and 'way to modern' to be too distracting to
carry on reading.

Also the argument I did read appears to be weak, the number of potential users
doesn't seem to matter if they don't bring you profits.

~~~
DanBlake
I am sorry that my spelling/grammatical error caused you to discount my
writing. That is entirely your choice of course, however I think you will find
the internet a rather unpleasant place.

Regarding your second point: Tell that to instagram. Your valuation is /only/
defined by what someone else is willing to pay for it, revenue or not. If you
do not agree, I have some houses in Detroit to sell you.

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wrongc0ntinent
Weak argument, probably the right conclusion. Internet users number may be the
most important metric, considering it spans continents now, including
countries at different levels of economic development. There's more likelyhood
of hedging. edit: I think the metric is important because users can become
innovators and providers easier then ever, not just because they have
disposable income.

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solomatov
The current bubble isn't that malignant as 2000 bubble. However, it's still a
bubble.

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rb2e
The only way to underniably confirm its a bubble is if it "pops".

Is snapchat worth 4 billion? Only when some buys it or it goes public. Till
then its speculation and we can be here till the "cows come home" debating if
we are in a bubble.

I think the best people to ask are PG, Fred at AVC etc. The ones who do this
for living who are making these decisions everyday and know the markets. I
don't know enough to say for sure and wasn't here for the last bubble.

~~~
DanBlake
Exactly right. Anyone telling you it is or is not going one way is crazy. Im
simply refuting that "its just like 2000" and showing some strength points.

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michaelochurch
Terrible argument, and here's why. The only thing being said here is that the
number of people (and devices) on the Internet is larger. That's true.
However, until you turn someone into a paying customer, that's a cost, not
profit. Premature eyeballs force premature scaling, which is expensive both in
the short and long term. (Even proper scaling is costly and risky, insofar as
it requires a management team to hire people with talents it cannot directly
measure; improper scaling is even more expensive.)

As awful as age discrimination is, the good news (for people currently 25-45,
who will be 35-55 in the next boom) is that the trend will probably go the
other way when the "social" bubble collapses. Why? Because investors are about
to get burned, hard, by a bunch of startups whose founders cared more about
being popular than making money. In five years, that will be the age
stereotype attached to young founders.

~~~
DanBlake
I get where you are coming from, but its very incorrect.

There is no additional cost for supporting 1k customers a month vs 100k
customers a month. However, your revenue will be 100x more.

Sure, there might be more incremental costs (bandwidth/storage) but it is NOT
statically in line with profit.

