Skip to main content

Silicon Valley: Billion Is The New Million

Image
By
On the heels of today's leaked info that Yahoo is buying Tumblr for $1.1 billion comes the news that some folks think that's too little. Tumblr earned a whopping $13 million in revenue in 2012; that's right; not $30 million, not $300 million: $13 million. Essentially, they are being bought for an almost 85x of their earnings. And someone is complaining?

Tumblr offers a lively photo-based blogging service...for free. It is quite active, and has a lot of users, which explains Yahoo's interest. And yes, Tumblr has burned through the cash, all $125 million of it. With 18 whole employees, and millions of users, it still couldn't generate enough revenue to hold on for more than a few more months...and Yahoo gives it a massive exit...and someone is complaining?

On the heels of Facebook's completed $1 billion acquisition of Instagram (12 employees), and it's imminent $1 billion acquisition of GPS app Waze (80 employees), it's pretty clear that $1 billion is rapidly becoming the $100 million of the dotcom bubble era. The fact that we are already moving to people complaining about being bought for a freaking billion dollars is absolutely the clearest indicator that we have not learned anything from the previous bubbles in Silicon Valley.

After the crash that took down Web 1.0, we said we'd look at companies providing real value, real revenues, real need. Mobile makes Web 1.0 and 2.0 look like chicken feed: absolutely everyone has a mobile phone, and is on it, constantly, so the hype is escalated. Yet, the reality remains for advertisers (real advertisers): traditional media = dollars; digital = dimes; mobile = pennies. Yes, those pennies add up to real money, but we're just not sure when. Instead, we get billion dollar photo sharing and crowdsourced traffic info.

As long as the eyeballs are there, smart folks with tons of cash will throw it around like drunken sailors; it just doesn't matter to their bottom line. Facebook, Google, Apple...all have lots of billions to throw away on bets. Yahoo, a brand that many had pronounced dead until Melissa Meyer injected it with life, had $3 billion in cash on hand. That's right, a "dead brand" with $3 billion in the bank. Topsy turvy already, but add in the fact that they just pushed 1/3 of their chips all in on a site that produced $13 million in revenue last year, but has great growth and stickiness, and you have to wonder if we're all looking at a poker game that fewer and fewer can play at, especially those companies that actually produce revenue and real value.

$1 billion is the new $1 million in the Valley. Ante up or go home, it would seem.
Labels:

Comments

Unknown said…
I recently just finished working on an infographic that explores some interesting questions concerning the Silicon Valley as it relates to the nation's technological advancement. I thought I would share it with you in the hopes you might be able to make some use of it. Here's the link: http://www.bestcomputersciencedegrees.com/silicon-valley/


Best Wishes,
Jack
Monday, August 5, 2013 at 7:20:00 PM PDT
Post a Comment

Popular posts from this blog

Loyalty Review: Kohl's Yes2You

By
 As some of you know, I've spent over 15 years in the customer loyalty space. So, when I come across a new retail loyalty program, I can't help but see the pluses and minuses. After this many years, it's kind of ingrained. Periodically, I'll share my thoughts with you. Today, it's Kohl's turn under the scope. Let's have a look, shall we? I've divided the review up into three sections: what's good about the program, what's bad about the program, and what I'd change about it. That last one has some actual value: I charged hundreds of dollars per hour for loyalty program consulting, and had over a dozen clients, before I moved to JustAnswer FT. But, being a pandemic and all, I'm giving it away for free here. Kohl's, you're welcome. Here we go! The Good Sign up is opt in Seems odd to praise Kohl's for this, but in department store loyalty, this is a rarity, and a smart one. It means the customers who are opted in are already prime...
1 comment
Read more

Revisiting Star Trek: The Next Generation: Season 1

By
I recently started rewatching Star Trek: The Next Generation from the beginning. I have nothing but fond memories of the original run in the 1980s, given how excited I was for a new Trek series in my lifetime (I had only reruns and the movies to stoke my Trek interest), and it recently occurred to me that, while I diligently consumed every TNG episode, I had not experienced the series since it's original run.  Why did I do this? Well, a few reasons: With the triumphant return of Sir Patrick Stewart to the smaller screen as the venerable Jean Luc Picard , I thought it would be interesting to contrast this version with the previous, and see how far he has come. It would add color to the character, as well as Sir Patrick. Frankly, with the COVID19 lockdown, the series I have binged upon have been intense, dark, and disturbing. Combined with the activity of the world, including insane politics, homicidal police who seem to view people of color as "prey," rather than their ch...
Post a Comment
Read more

The Icarus Effect

By
This morning's news started with the latest grim proof of overdevelopment in a tough sector: SkyBus Airlines shut down , less than year from when it started. Never heard of Skybus? Not surprising; they chose to focus on trips from Ohio to the West Coast for ridiculously low fares. Yes, you read that right: the airlines' unique niche was that they focused on trips from Ohio . Was air travel such an amazingly profitable business that we needed that much segmentation and focus? Of course not. A year ago, when Skybus was just getting off the ground (har har), fuel costs were at an all time high. United was still in bankruptcy; Delta, a fellow airline with a major hub in Ohio, was just exiting Chapter 11. And yet, "irrational exuberance" led investors like Nationwide Mutual Capital, Huntington Capital Investment Co., and Battelle Services Co. to ignore the obvious signs of risk, and dive into what was a dubious investment. Today, they, and the passengers who were lured by ...
Post a Comment
Read more