

As Social Sites’ Shares Fall, Some Hear Echo of 2000 - llambda
http://www.nytimes.com/2012/07/28/technology/as-social-sites-shares-fall-some-hear-echo-of-2000.html?pagewanted=all

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tokenadult
If you read to the end of this interesting article, you see this comment on pg
of YC (and HN):

"In an e-mail sent to founders last month, Paul Graham, the co-founder of Y
Combinator, an influential start-up incubator, warned of possible headwinds.
But Friday he said in effect not to worry — at least not yet.

"'It’s too early to notice any effect on valuations,' Mr. Graham said.
'Personally though, I have a lot of confidence in Facebook. I expect this is
just a random fluctuation.'"

My prediction about Facebook is "Facebook will go the way of AOL, still being
a factor in the industry years from now, but also serving as an example of a
company that could never monetize up to the level of the hype surrounding it."
I could be wrong, but that's my sense of where Facebook is in the market. Of
course pg has a much better track record than I have in making investments,
and my prediction is not wholly inconsistent with some near-term upside in
Facebook's share price.

~~~
InclinedPlane
I think the situation for facebook is worse than that, actually. I think they
will get disrupted and lose their userbase before they have a chance to
monetize it to the degree that investors are expecting.

~~~
citricsquid
It's probably true that Facebook will never effectively monetize 1bn users
(without charging for Facebook access) but I don't see what indication there
is they'll get "disrupted" and lose everything.

If anything Facebook is in an even stronger position right now when you look
at what has happened with google+. The largest internet brand (Google) can't
even beat Facebook with a (supposedly) superior product _and_ already huge
control over the internet.

Facebook is going to be around for a long time.

~~~
markkanof
It's possible though that people are just losing interest in the type of
experience Facebook provides. If that is the case then Google+ just arrived at
the wrong time. No matter how good it is if the audience is losing interest in
the whole concept it won't do well. So the relative failure of Google+ might
not indicate that Facebook is in a strong position, but that rather the whole
"social industry" is in a weakening position.

~~~
waterlesscloud
Google+ is not a fundamentally different experience from Facebook. It's
slightly different, and that isn't enough.

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Alex3917
"Another couple of days like this and the great tech bubble of 2012 might
recede into history."

One can only hope. The early 2000s was one of the best periods in the history
of the Internet. The stuff that's hot today is all just extensions of stuff
that was pioneered back then. Having the money go away for a bit so that folks
can once again go back to truly innovating without the insane short term
pressure can only be healthy for the longterm state of things.

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spaghetti
I'm starting to wonder if FB has discovered/created the world's lowest value
entertainment. If there's nothing better to do then sure I'll consume my
"friends" food photos and drinking stories. But it doesn't take much to steer
my attention away. Simple things like boiling water for coffee evaporate my
fixation on some friend's inane status message.

If FB's content is really that valuable then put it behind a paywall and cha-
ching! Just like Netflix or Hulu+. However I think it's the first massive-
scale "default because I have nothing better to do" entertainment. Which may
not lend itself to monetization as well as search traffic.

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notJim
Does anyone else find it odd to lump Netflix in with Facebook and Zynga? They
offer entirely different things, have different business models, relate to the
public and their customers differently, and as far as I can tell, different
struggles.

~~~
lukifer
I agree, particular given that Netflix's position is not due to the nature of
their business modal, but a specific strategic blunder with pricing.

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cft
I think Facebook actually has a chance to stick around, but the mistake of
investors was to project its success to other social companies. FB may be the
last mover to the social market.

~~~
firefoxman1
Facebook's going to be here a bit longer. Sure, I think we've all noticed we
use it less than we used to, but Facebook will only slowly decline until a
truly superior replacement comes along. Then you can kiss it goodbye.

~~~
mrtron
It is all about the success of mobile adoption + monetization of mobile.

Facebook is well positioned for it. The android user experience is very
slippery.

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cletus
This talk of "echoes of 2000" annoys me.

I see this as the market acting reasonably rationally actually. Facebook
shares are off ~40% from their IPO because they were overvalued. They gained
valuation in a hype bubble on secondary markets with limited volume between a
small set of players. Once exposed to greater liquidity, easier price
discovery and a wider market, the share price has headed towards something I
would consider more realistic.

The risks for Facebook are enormous. Apple and Google (disclaimer: I work for
Google in display advertising) are far more established and have a much
broader product offering than Facebook across the Web, mobile and other areas.
They are both profitable and can sustain a long drawn out campaign.

Facebook is reliant on social-gaming income (which is increasingly going
mobile and out of Facebook's ecosystem to Apple's and Google's) and what
amounts to display advertising, where they are competing with Google's
Doubleclick offerings.

The price paid for Instagram is a clear warning sign on the risks to Facebook,
that a company of 13 years in 2 years can become what amounts to an
existential threat to Facebook should concern any Facebook investor.

I also stand by my (many) previous statements that I think the utility and
value of "social search" is far more limited than it's hyped up to be.

But whatever the case, these are real companies with real revenues. This is
nothing like 2000.

~~~
ChuckMcM
I'm with you on this one, I lived through 2000 and I can tell you that this is
no 2000.

The folks managing the IPO all have egg on their faces, but nobody's trust
fund got destroyed, no mass layoffs, no VC suicides, none of the "Hey the
music stopped oh shit I'm still long on X, Y, or Z"

Facebook brought in over a BILLION dollars last quarter. They "lost" money
because they are doing the 'count stock options as an expense' thing that was
foisted on Tech companies post bubble. But they actually 'earned' a quarter
billion dollars. Compare that to any number of companies that never earned a
dime from founding, through IPO, through ignominious death. Sheesh.

One of the thing that is going to bite both Google and Facebook are some of
the insane salaries they signed up for to keep people at one place or the
other or to switch. Those are great engineers but most of them are never going
to have a lifetime value of millions, even if they commit 20 years of their
life to the company. That is a correction I don't look forward too,
conversations like "Excuse me? You were thinking maybe $280K to start and an
annual bonus plan? Uh Next!"

~~~
meric
Of course you count stock options as an expense.

If the event results in a loss of value for existing investors isn't called a
loss what should it be called?

~~~
ChuckMcM
This is a troll obviously but for those of you too young to remember, this
link captures most of the debate:
[http://www.nysscpa.org/cpajournal/2005/1105/essentials/p38.h...](http://www.nysscpa.org/cpajournal/2005/1105/essentials/p38.htm)

From that page is this quote:

 _"David Zion, an analyst at Bear, Stearns & Co., estimated that S&P 500
companies would have reported an average of 9% less earnings in 2000 if
options had been expensed on the income statement. For tech companies, this
reduction would have been even greater; for some, profits would have turned to
losses."_

Which is the case for Facebook (profits turning to losses).

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thisismyname
The main difference regarding today's "Social Sites" is they have money in the
bank earned from advertising, etc. (Zynga over $1 billion, twitter over $600
million, facebook making over $1 billion per quarter, etc).

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dm8
I thought Facebook matched the investor expectations this quarter yet wall st.
don't have confidence in them. I find this confusing.

And by the way, if you look at the stock market for tech companies for last
two days. Almost all the tech giants (Google, MSFT, Apple, LinkedIn, Amazon,
Yahoo etc.) were up. So I don't see if we can say it's like 2000 when stock
markets crashed!

~~~
ahi
Facebook's price drop is just reality setting in. There was a lot of hoping
and wishing going on that was dispelled with hard numbers.

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damian2000
Things have changed since back then, but have a read of this news story from
early 2000, it sounds kind of similar to now in some regards ...

<http://news.bbc.co.uk/2/hi/business/719474.stm>

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joe_the_user
What's different about today is that the web and Facebook seem far more
integrated into every part of daily life.

I don't know if that means things will better, things will be worse or doesn't
mean anything.

