Remember back in the heyday (if there ever actually was one) of professional wrestling…or “wrasslin’ “ as we say down south…there was some huge event billed as “Wrestlemania”? I really was never into wrestling but I seem to remember it was some sort of all star, good guys versus bad guys, pay per view, cage match, knock down drag out type of event. “Wrestlemania” was followed by “Wrestlemania 2”. Didn’t see that one, either but I’m pretty sure it was the same crappy event as the first “Wrestlemania”. Something similar is currently going on in the capital markets. It happened over a decade ago and was called “Stupid Internet IPO mania”. The sequel is happening now and it’s just as dumb as before.
At the end of the 20th century, there was no shortage of bonehead stupid, internet IPO’s. No earnings. No revenue models. Very vague concepts. No surprise that things ended badly. The internet has grown up considerably since then and many internet oriented companies have figured out how to actually make money. However, the recent crop of offerings feels very retro. The maniacal pricing in the secondary market is back with a Ric Flair style vengeance. Professional social networker, Linked In (LNKD) was instantly rewarded with a ridiculous valuation. Pandora (P) had a lot of money thrown at it for a hot, oversubscribed IPO despite analyst doubts about the company’s ability to make money. After all of the hype, the price fizzled quickly.
Money can be made on a big scale on the internet by public companies. Ebay (although it’s probably seen it’s day), Google and Amazon seemed to have done pretty well. I’m sure there’re others. However, a lot of these newer companies strike me as businesses that would be more successful if they remained private. With a publicly traded structure comes much more accountability as you’re dealing with lots of other people’s money. Individuals, institutions and research scrutiny change the way these loosey-goosey outfits work.
I can understand how Pandora could eventually make money. I’m a user of the free version and a big fan. It’s the poor man’s XM. The ads aren’t too intrusive yet and even if they got to the point at which they were, most people still wouldn’t mind. Plus, there’s probably some kind of per subscriber deal between Pandora and the wireless provider much like in the cable television industry.
But for the life of me, I can’t figure out how Linkedin or even the mighty Facebook can or will do it. I’m sure they will. Just don’t see it in the here and now and with a bazillion dollars raised publicly, that doesn’t really fly.
These companies are much better suited to be private entities. There’s no shortage of private capital willing to throw money at ideas like these and a lot of times private money is much more patient. It makes more sense. These businesses can stay private and then eventually, maybe a larger, traditional media company will waste it’s money. See: News Corp and Myspace.
But, just like pro wrestling, the internet IPO mania will continue. As long as there are enough idiots to look at it, they’ll keep doing it.
Well…let’s try to wrassle this week’s three lil’ piggies…
At the end of the 20th century, there was no shortage of bonehead stupid, internet IPO’s. No earnings. No revenue models. Very vague concepts. No surprise that things ended badly. The internet has grown up considerably since then and many internet oriented companies have figured out how to actually make money. However, the recent crop of offerings feels very retro. The maniacal pricing in the secondary market is back with a Ric Flair style vengeance. Professional social networker, Linked In (LNKD) was instantly rewarded with a ridiculous valuation. Pandora (P) had a lot of money thrown at it for a hot, oversubscribed IPO despite analyst doubts about the company’s ability to make money. After all of the hype, the price fizzled quickly.
Money can be made on a big scale on the internet by public companies. Ebay (although it’s probably seen it’s day), Google and Amazon seemed to have done pretty well. I’m sure there’re others. However, a lot of these newer companies strike me as businesses that would be more successful if they remained private. With a publicly traded structure comes much more accountability as you’re dealing with lots of other people’s money. Individuals, institutions and research scrutiny change the way these loosey-goosey outfits work.
I can understand how Pandora could eventually make money. I’m a user of the free version and a big fan. It’s the poor man’s XM. The ads aren’t too intrusive yet and even if they got to the point at which they were, most people still wouldn’t mind. Plus, there’s probably some kind of per subscriber deal between Pandora and the wireless provider much like in the cable television industry.
But for the life of me, I can’t figure out how Linkedin or even the mighty Facebook can or will do it. I’m sure they will. Just don’t see it in the here and now and with a bazillion dollars raised publicly, that doesn’t really fly.
These companies are much better suited to be private entities. There’s no shortage of private capital willing to throw money at ideas like these and a lot of times private money is much more patient. It makes more sense. These businesses can stay private and then eventually, maybe a larger, traditional media company will waste it’s money. See: News Corp and Myspace.
But, just like pro wrestling, the internet IPO mania will continue. As long as there are enough idiots to look at it, they’ll keep doing it.
Well…let’s try to wrassle this week’s three lil’ piggies…
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