Sunday, January 23, 2011

Another Dot Com Bubble?

Are we headed for another Dot Com Bubble?  Yup.

We are heading for another Dot Com Bubble.  Why is this?  A number of factors.

1.  People are coming off a bad Real Estate market, as in 1989, and looking for places to invest money to get a quick rate of return, and dot com stocks look attractive, as they did in 1995.

2.  Human memory seems to last only about a generation - 15-20 years, so no one alive today, except me, apparently, remembers the Real Estate crash of '89 or the dot com bubble of '95.

3.  Companies that have not made dollar one, such as Facebook or Groupon, are being hyped with enormous price numbers.

4.  No one seems to remember that any of these dot com models can be readily copied - there are low barriers to entry.

5.  The death of Business Method Patents means that the few pioneers in this industry won't be able to protect their innovations if they are copied.

6.  Technology copies are cash-rich and buying up other companies in the hopes of making more.  And this is driving up prices for many tech companies as well as dot com companies.

The idiot media is hyping the snot out of these companies - Facebook, Twitter, etc. without bothering to do the fundamentals on them.  Twitter, while making a lot of news, has a very small subscriber base, which has stalled.  It turns out that only a very few people in the world want to post short messages on when the last time they wiped their ass was.

Similarly, Facebook is getting a lot of attention because someone made a movie about the founder - Zucker-whatever-his-name-is, who didn't really so much invent social networking, as steal some ideas from others and get really, really lucky (and never confuse brilliance with luck!).

As this site noted, concerns about social media sites go back for years.  Many proliferated, few survived.

But does that mean the survivors are immune from market forces?  That fads can't die out and go away?

For me personally, facebook is becoming less and less interesting and more and more frustrating.  The "new" design is harder to maneuver and harder to edit.  And more and more, they want "apps" to be allowed to access your page - and make it harder for you to get rid of them.  Facebook's slow response to the recent clickjacking attacks and other issues with hijacked accounts illustrates how poorly staffed they are and how little they invest in real technology.  As I noted before, they haven't even properly policed their own domain name - a first step for any "grownup" web site.

Of course, the bubble won't burst just yet.  Let it simmer for a few years.  More hype, more planted stories - more spectacular IPOs in the offing.  Just as your average Joe gets in, the bottom will fall out, you can bank on it. 

Poor suckers - they'll probably buy in just as the gold bubble collapses - looking for a place to "make back" their losses....