Street Speculator

In the mid-90’s, the TECH BUBBLE consisted of anything with the words “dotcom” at the end.

The new TECH BUBBLE is any social networking platform. Facebook, Digg, Twitter, Ning, etc…

These companies, to their credit, generate more traffic than anything other web medium. The problem lies in their ability to, or lack thereof to monetize their web traffic ($$$$$$$$).

It seems as every social networking site initially uses the Google AdSense program, where they split revenue with Google when site visitors clicks on one of the advertisers links. But with the social networking sites, most users are there because of the ability to communicate with friends and organizations. Very little attention goes to the ads alongside web entries (When was the last time you were on Facebook and clicked on one of the ads along the left column?)

The bubble will be felt by the venture capitalists (VC’s) funding these companies and not the investing public as before. (So, your 401K’s for now are safe) The VC’s invest with the expectation of cashing out their interest when the company goes public. However, the IPO (Initial Public Offering) market stinks right now with the credit crisis/crunch and all. Plus, any post 1995 tech company attempting to go public with no revenue (dotcom or not) will not draw very much, if any investor interest. Therefore, the VC’s will be playing a longer than usual waiting game with equity trapped into the speculation of a company’s worth.

The only valuation of a social networking company we have to date is that of Facebook. Microsoft invested $240 million into the company for a 1.6% interest, which then values Facebook at $15 billion.

If you can guess where the next social networking meal ticket will come from, let the SPECULATORS know.

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Remember this: Google purchased YouTube for over $1 billion only a few years ago. It has yet to realize a significant return on its investment although, and according to Google CEO Eric Schmidt, that there are over 10,000 videos uploaded to YouTube every minute.