] HipMojo.com » Why We Are Not in a Bubble (Again)

Why We Are Not in a Bubble (Again)

Many inside and outsiders (i.e those who work on the Web or simply write about it) have started to talk about the Web experiencing a sort of Bubble 2.0. 

They point to things like Google’s stock crossing $500 as a sign.  Of course, that just means that they do not quite grasp the basic principles of stock splits (before and after an IPO) and the fact that most companies would have IPOd at a price of $25 (for example) and not $100, causing the 400% spike in Google’s price look suspicious.

For the record, we’re not bandwagon jumping Google fans: it’s a great company, fantastic stock but its got plenty of risks and investors are paying a premium for it.  It made our Top 10 Stocks of All Time, but even though we think it could surpass MSFT in market cap, we doubt it, and surely don’t think it’s the world’s first trillion dollar market cap company.

But back to the point: we’re not in a bubble (though we are seeing pockets of bubbles) for the simple reason that at least some things are different:

Back in the late 1990s and early 2000, VC money was funding the advertising and IT investments because the Nasdaq crossing 5,000 was a sign that the payoffs for VCs would justify the investments.  When the Nasdaq popped and the dot come bubble burst, VC dried up immediately, meaning that investments in IT and ads ceased as well.

The reason was that online businesses in turn did not see a need to advertise and boost audiences anymore because there was not much in the way of online ad dollars.

After the burst, CPC ads took off and advertising began to offer some kind of ROI.  Today, we might see a slowdown in CPC rates but demand is strong enough that if one advertiser stops to bid on a keyword, there are more than enough willing to step in and replace said advertiser.

Why?  Because there are far more people online today than back then, broadband reaches over 50% of homes, and online ads are a $15B ad industry…

Of course, as I write this, writing Nasdaq popped after 5,000 could become Google popped after $500, but even then, if buyouts from Google and company did not materialize, even without the lush exit strategy, a business could be built online.  That being said, nothing would make me happier to see half of the nonsense wannebe Web 2.0 feature/applications trying to pass off as companies disappear. 

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Posted By: Ashkan Karbasfrooshan | Dec 3rd

10 Responses to “Why We Are Not in a Bubble (Again)”

  1. Scripting News for 12/3/2006 « Scripting News Annex Says:
    December 3rd, 2006 at 1:28 pm

    […] Hipmojo says we’re not in another bubble.  […]

  2. No Bubble - At Least for Now | The Last Podcast Says:
    December 3rd, 2006 at 5:55 pm

    […] himmojo.com has some good reasons why there is no Web 2.0 bubble: After the burst, CPC ads took off and advertising began to offer some  kind of ROI.  Today, we might see a slowdown in CPC rates but demand is strong enough that if one advertiser stops to bid on a keyword, there are more than enough willing to step in and replace said advertiser. […]

  3. Dan Says:
    December 3rd, 2006 at 6:13 pm

    I guess the point of your article is that it is different this time. How many times did we all read similar articles in 1998?

  4. froosh Says:
    December 3rd, 2006 at 6:24 pm

    Dan,

    Not sure how much or how little you have read on this site, but I definitely do not abide by “it’s different this time” mantra. My point is that the outcome will not necessarily be driven as much by Google because unlike last time, VC money is not driving the Web, it’s individuals, small & medium-sized and large, global advertisers. Sure, a lot of goes to Google, but if any one single client balks at giving Google a check, someone else will step in. As a publisher, advertiser, search site operator, I can see that.

    I am not even saying that Google stock won’t go down, it probably will, but the overall state of the Web is far healthier than some doomsday scenario architects would make you think.

    Cheers

    Ash

  5. howard lindzon Says:
    December 3rd, 2006 at 9:09 pm

    With you on this one mojo man

  6. quasi.dot » Blog Archive » Bolle… Says:
    December 4th, 2006 at 1:42 am

    […] Non c’e’ bolla, forse qualche bollicina. Panorama frizzante? Attenzione alle tasche. Non credo pero’ che indice della bolla debba essere la discesa dell’azione Google. Chissa’ se c’e’ qualcuno altrettanto attento all’hype generato dall’attesa di nuovi farmaci, dati per buoni prima dei test. tags: bubble 2.0 […]

  7. Mayo Says:
    December 4th, 2006 at 7:22 am

    When you see NASDAQ at 4000 then you should say it’s a bubble, but for new law (Oxy or Oxey or whatever…. cant remember..) you can’t enter IPO so easy, if it wasn’t that law it would be for sure Bubble v2.0, this way it will stay normal, it will be like Ash said local bubbles that can but wont affect web industry on global scale, and after Enron, iDoor, Boo.com, … i can’t think anyone jumping in a bandwagon… except some new schmuck who hasn’t seen the web for quite a while!

  8. Mayo Says:
    December 4th, 2006 at 7:48 am

    sorry, Enron has nothing to do with internet but i hope you understand what i mean, and it’s not iDoor but LiveDoor.com (they had over bloated earnings — Japanese company)

  9. Charlie Says:
    December 4th, 2006 at 9:56 am

    The fact that we have somebody in our midst called ‘HipMojo’ writing about a nonBubble may indicate that we are indeed near the end of something bubble-like! :)

  10. Random Thoughts of a Maverick » Bubble Burst again ? Says:
    December 10th, 2006 at 9:43 pm

    […] A very interesting blog post on the above topic was posted on HipMojo.com, read this post […]

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