Ronnie05's Blog

Are valuations in Social Media stretched? (Cue:Under-promise, Over-Deliver. What about Over Promising?)

Posted in Social context, media and advertising by Manas Ganguly on May 20, 2011

Professional social networking site LinkedIn is raising the price at which it will sell shares in its forthcoming initial public offering (IPO). The new sale price values the firm at $4.3 billion rather than the earlier $3 billion. This comes in the wake of the fact that comScore reported 65% Y-o-Y increase, from 48 million users in March 2010 to 79 million as of March 2011 in traffic to Linkedin.LinkedIn made $15 million last year. It’s now worth $8 bln. That’s a P/E of 37+. Isn’t that a sign of bubble?

Signs of trouble yet?

In 1999-2000 Dotcom burst, overvalued dotcom – companies, which were not-profitable, went bankrupt and together with it millions of (invested) money and many jobs were lost! No one really knows if there is a bubble until after one pops. Nevertheless, there are many signs of froth. The valuations in Social Media are stretched a bit. Microsoft bought over Skype for $8.5 billion, Goldman Sachs has invested $1.5 billion in Facebook that has valued FB at $84 billion, Groupon is valuated for $15-$20 for its IPO listing. Such valuations are reminiscent of the dotcom bubble which busted 10 years ago.Twitter is being valued at $10billion and more. Zynga, creator of the popular Facebook game FarmVille, is worth more than $5 billion.Yammer, a system for sending Twitter-like messages inside businesses, recently raised $25 million, while investors reportedly signed a check for close to $30 million for a niche blogging site called Tumblr. GroupMe, a new group messaging app for cellphones, raised $9 million. Path, an iPhone app for sharing only photos on a social network limited to just 50 people, received $2.5 million. Its competitor, Picplz, scored $5 million. And those are just within the last few months. The trend accelerate over the last six to nine months. The valuation of Facebook has multiplied by a factor of 7 in the last 12 months.

Dotcom was different

Back in the ’90s, companies got funded for five times the amount that Tumblr raised and didn’t have anything close to a business model. People were getting $50 to $200 million a pop and it brought down an entire industry. The frenzy is as much the result of simple laws of supply and demand as the herd mentality. Thanks to the constantly falling cost of computing power, a start-up needs less money to get off the ground. More wealthy people are viewing investing in technology as a hobby, which has increased the competition. Investing in technology has become fashionable. It used to be that angel investing was the province of wealthy men. Now its become the province of everyone. Venture capitalists — hungry for growth and troubled by weak returns — are moving toward smaller investments, hoping to catch the next Facebook in its infancy.

Valuations and Companies will need to move with caution

There’s a lot of exuberance in the social media and technology. A lot of the valuations there don’t make a lot of sense.But, most Silicon Valley investors still see no signs of gloom and doom. Start-ups today have robust business models and business cases that make them viable. The Internet ecosystem has also matured. There is more to valuation than just eyeballs. It could be different this time! In 1999 when the bubble happened many companies did not have business models and advertising on the Web was very immature.2010 and onwards, the real challenge for start-ups flush with venture cash would be proving they were worth the investment or risk having to fold their companies.There may not be a big implosion, but down the road there will be a bunch of blood and tears. The music is going to stop and people will realize there aren’t enough chairs for companies to get the next round of financing. The High valuations though may be cheered for are long term liabilities on the entrepreneurs.The key question now is whether they can accelerate their revenue and earnings growth to eventually validate the valuations.

There are elements of the LinkedIn model – recruitment search – which reflect successful models elsewhere.The LinkedIn Valuation is, of course, just an appetiser for the big one – the prospective float of Facebook at some point in the not-too-distant future. How it is priced will provide a clearer picture of whether the possibly irrational exuberance around LinkedIn’s debut was specific to the dynamics of its offer or reflects the broader capitalisation of optimism about the commercial prospects for the major social networks.

A sound business proposition is the ability to under-promise and over-deliver. Currently the Social Networking valuations are very tall promises which make delivery (at such high order) a suspect. What we will need to wait and watch over the next 2 years is the ability of organizations to be able to spin the profits that the valuations oblige them to. If they cannot stand up to the expectations, then we all know that this is a bubble.We live in interesting times, dont we?

Online Identity Management (A beginner’s guide)

Posted in Social context, media and advertising by Manas Ganguly on January 10, 2010

A dinner table discussion on Online identity management is what got me to write this post. Intended to be a nerd’s guide to “doing things” on the net.

Personal identities are migrating to the internet based social,crowd and professional networking platforms. Given the transformatory and disruptive effects that internet has brought on to societies, communities, businesses, information, and technology, it was about time that indentities went online as well. This post discusses Online identity management as a template.

Why do we need Online identities?
The “global village” term never seemed more true. What the internet has done is that it has multiplied reach and accessibility and democratized information. The internet is fast becoming every individual’s window to the world. What we choose to showcase through that Window is what we want to project ourselves as to the world at large. That is what i refer to as Online identity.

Online identities
The online identities may vary basis age demographics (assuming that the user is a normal internet user). So while students have a very heavy element of social networking in their online identities, executives and professionals will see a balance of social and professional networking elements. The reasons are obvious.

Thus we have established the two important platforms: Social Networking and Professional networking as the two pillars of Online Identity management. Facebook, MySpace, Bebo, Orkut are the prominent social networking sites and Facebook is the biggest amongst them. While Facebook also can be used for Professsional networking, my choice of Professional networking site is Linkedin because of the many other things that it allows you to do beside meeting and knowing people in the same profession. I use Facebook for my Social Networking and Linkedin for my Professional networking requirements. Sites such as Slideshare and Box.Net are important supports to my networking needs as they can be referenced readily for relevant subjects and material.

What has emerged with Twitter is the trend of conversation. Even before Twitter, Facebook, Orkut,MySpace and other Social networking sites featured conversations but then Twitter democratized it by taking the conversation to the crowd rather than limiting it to our immediate circle of friends and relatives and collegues.

Twitter thus has become a worldwide portal to meet people, discuss ideas, microblog ones opinions, create an online presence and publicizing self. It is also incredibly useful as a forum where one can talk to the experts and gain some recognition in the crowd. I strongly suggest refraining from status updates like “Taking my dog for a walk” on Twitter. That is a waste of time and unless you are Paris Hilton, no one really bothers about you or your dog.

In the heart of Online Identity management is the “I, me, myself” thing. And nothing defines it better than an online blog, or a website for self.

The decision to blog is not about an “impulsive do” but revolves around a larger context of “How i define myself? What is my expertise? What is my chosen area of work?” and a doggedness of voicing views regularly. As with the starters, it takes patience and time for the scale and number of blogs and the traffic to build. It takes time getting hits and reviews and comments. Hence this is a slow burn activity. WordPress and Blogger are the most favoured Blog sites around that Bloggers use. One can however support his blog with publicity on Twitter, Professional and Social networking sites. Depending upon the relevance of the message and the target consumers of the information, traffic follows. A YouTube is a higher order blog where you can audio-visual your ideas and thoughts. The thing with Online content is that it needs to be relevant to the audience else you end up making monkeying yourself.

The Fourth pillar in Online identity management is not much of “identity” stuff anyway. It is more of “convenience and storage” over the internet.So there are Google Docs,Calendar; there is Microsoft Sky Drive; there is GMail for all your mails; there is Picassa/Flickr for all your photos and more. It makes sense putting the data up in the cloud so that it can be accessed readily by you instead of lugging around your laptop.One good thing is that most of these portals can be connected through with each other such that a change in one updates others as well.

So there you have it.. It isnt easy.. It is time taking and the whole idea needs to be strategically thought through in context of how you are, what you do and where you are willing to go. The decision and the thought predate everything else in building the online identity.

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