Dot Com Bubble Burst 2.0?

The internet is probably the biggest single continuing achievement in human history. It constantly evolves to become more and more integrated into our daily lives. It helps organize our lives, entertains us and helps run our businesses. And business is where it's at for the internet. Business and the internet rely on each other, hence there are some absolutely huge internet based companies around at the minute, take Google and Facebook for example.

It's Facebook I really want to focus on here. It has a current subscriber list of roughly 800 million. Behind Google, it's probably the biggest online company on the planet. Up to to now, it has remained a business solely existing in the online universe. But it is currently drawing up plans to float on the stock exchange either before the end of the year or at the beginning of 2012, valuing itself at a staggering $100 billion!

This to me a huge over-estimation of what any internet company could possibly be worth. Facebook is a solely web-based social network, selling no physical product. The company is totally different to someone like Apple, who are currently worth anywhere in the region of $240-$300 billion. The difference here is that they're selling a physical product, something you can hold in your hand and use to boost your personal enjoyment or aid your job in business.


Facebook so far have earned their money through their advertising and selling of private shares to various people and organizations. But can a social-networking site really be worth the $100 billion Zuckerberg is hoping for?


My worry is that trying to turn a website without a physical product into a business is unsustainable. It would rely on public interest. We all thought MySpace was here to stay. Now look what a disheveled presence it now has compared to what it used to be. Thousands of staff made redundant, multiple sales and re-sales, company worth slashed. This is a company which only had social-networking and a music service to offer - something very similar to Facebook.

Are we seeing the makings of a dot com bust 2.0? Look at the share values of other sites like Groupon and LinkedIn. Both have suffered sharp falls in the value of their shares. 

Websites tend to have a pattern of losing interest. This site for example has quite sudden loses of interest from time to time. People must get bored of me! And that can be taken for things like Facebook and other social-networking sites. People will get bored and will want something new, no matter how many times you change the interface and add new extra little features that many probably won't use anyway. So turning something which such a volatile future is very risky, and and I don't personally believe it can work.


Comments and opinions welcomed as always!

Global Recession No 2?

I know this is going to sound like a negative post, but I don't think I can just skip over the subject as if it's not happening.


Worries about European and American debt has caused the financial markets to sell off their shares in a manner not seen since the financial crisis 3 years ago. Markets are spooked by the fear that governments won't be able to pay off their debts and that the measures they are taking to reduce their budget deficits aren't far reaching enough.


The biggest European risks at the moment are Spain and Italy. Today the ECB announced that they would start buying up Spanish and Italian debt to try to ease the worries in the markets, but all Asian markets closed sharply down, and at the time of writing the FTSE 100 is down 1.5%. Last week alone the FTSE lost over $262 billion - that's about the same as our whole budget deficit in sterling!


So what is the going to mean for the spending public? Well this crisis is different to the last one in the fact that governments are struggling with their debts and not the banks, so immediate liquidity problems shouldn't be a problem. However, if a country was to default on it's debts, banks with money locked into those government would then start to take hits. It's then when we could start to see banks coming under the strain again.


The big worry from our point of view is how much media coverage this story is getting. The big headlines and 24 hour analysis isn't going to inspire the public to go out and buy a house full of windows and doors. I know some of you are going to think I'm being hypocritical for writing this post, but as I've said before, this site gets nowhere near the coverage the news channels do, so won't really cause that much harm. 


There is a potential for this crisis to be as bad as the one in 2008. At the moment the markets are very volatile, full of knee-jerk reactions because of the potential unknowns. Those buying and selling just need to keep their heads. Over reactions could cause this situation to become unnecessarily worse, plunging the world into another recession.