Social Media Tech Bubble: Myth or Real?
Mashable has a good piece on the Social Media Tech bubble. Do you think companies like Facebook, Twitter and Groupon have over inflated evaluations, with 30-50x their annual earnings?
I did a bit of my own number crunching by comparing two sets of public traded companies (traditional and web focused) alongside social media.
The graph makes sense, established technologies have lower risk/lower rewards, and social media offers more potential, so is priced with a premium. As time goes on, social media would nudge down to more realistic numbers. But then some new technology will take the lead spot with even crazier evaluations. This could perhaps be social mobile apps? For instance, Color has recently raised +40 million for a mobile app that has no revenue stream. They even spent $350K on securing a color.com domain. Probably the highest domain purchase for a startup with no sales.
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