

How the second tech bubble will burst - eggie
http://www.goldworth.com/index.php/82-our-blog/7254-how-the-second-tech-bubble-will-burst-in-the-words-of-silicon-valley-s-poster-child-and-world-s-youngest

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eggie
This is the relevant bit:

> Fed has created abnormal market conditions by printing money and keeping
> interest rates low. Investors are looking for growth anywhere they can find
> it and tech companies are good targets - at these values, however, all tech
> stocks are expensive - even looking at 5+ years of revenue growth down the
> road. This means that most value-driven investors have left the market and
> the remaining 5-10%+ increase in market value will be driven by momentum
> investors. At some point there won't be any momentum investors left buying
> at higher prices, and the market begins to tumble. May be 10-20% correction
> or something more significant, especially in tech stocks. Facebook has
> continued to perform in the market despite declining user engagement and
> pullback of brand advertising dollars -- largely due to mobile advertising
> performance - especially App Install advertisements. This is a huge red flag
> because it indicates that sustainable brand dollars have not yet moved to
> Facebook mobile platform and mobile revenue growth has been driven by
> technology companies (many of which are VC funded). VC dollars are being
> spent on user acquisition despite unknown LTV of users - a recipe for
> disaster. This props up Facebook share price and continues to justify VC
> investment in technology products based on abnormally large mkt cap
> companies (i.e. "If this company attracts just 5% of users that FB has, it
> will be HUGE" \- fuels spend on user acquisition as user growth is tied to
> values). When the market for tech stocks cools, Facebook market cap will
> plummet, access to capital for unproven businesses will become inaccessible,
> and ad spend on user acquisition will rapidly decrease - compounding
> problems for Facebook and driving stock even lower. Instagram may be only
> saving grace if they are able to ramp advertising product fast enough. Total
> internet advertising spend cannot justify outsized valuations of social
> media products that derive revenue from advertising. Feed-based advertising
> units will plummet in value (in the case of Twitter, advertising spend may
> not move beyond experimental dollars) similar to earlier devaluing of
> Internet display advertising.

