Facebook’s $1 billion acquisition of Instagram has excited the internets. Again. I opined on this last year and I cleave to it now: the dotcom bubble still exists. As the August body of record in the UK The Metro reminded me this morning, this valuation of Instagram makes it worth more than the New York Times (I won’t link to the Metro on principle because of this, so you’ll have to make do).
A further note: Instagram has no income stream from either advertising or subscription fees and employs a total of 12 or 13 people, depending on which source you choose to believe.
In a world where financial reality is still yet to truly bite, despite 3 years of colossal warnings written in huge pink neon letters in the supplementary pages of the UK, US, Japanese and European budgets, the only industry apparently stupider than the finance industry is the tech industry.
This bubble is about 5 or 6 years overdue to pop. Catch you on the flipside when, hopefully, sanity will have come to prevail.
The USA narrowly avoided voting itself into financegeddon over the weekend, but nothing has changed for the World’s Sole Superpower(TM). It is still spending money at a rate vastly higher than it can generate – and seeing most of that money getting siphoned off into corporate coffers while normal people sleep in sports halls.
As yields on Spanish bonds continue to drift higher than they were before the Euro was ‘saved’ the other week, the Euro can-kicking exercise looks to be every bit as effective as trying to fend off Moth-Ra with a table spoon and a French-English phrase book. Meanwhile, the Chinese are in the grip of several unsustainable inflationary booms in their own economy and when reality dawns will have learnt that slave labour an economy maketh not.
So your technology shares are overpriced. Whenever the crash arrives, the one thing people won’t be doing is buying an iPad 3.7 or whatever generation of Android phone we’re on now. Subsequently, the value of all these hilariously pointless doodads like Foursquare and Twitter is going to sink faster than Rik Waller chained to a fridge full of lead ingots.
The upgrade cycle is going to look a LOT longer in 2013 than it does now which is going to play merry hell with whole swathes of assumption behind the price of tech shares. Watch for a new trend in downgrading as people discover that, actually, spending 40 quid every month on a phone with Angry Birds makes little sense in a world where it costs £2.80 for a packet of crisps.
The technology boom lasted from 1999-2011, which wasn’t a bad innings. Only on the other side of the crash will it be apparent which services actually added value to our lives – and the list is likely to be quite short.
I think Google’s playful persona has really been more of a marketing tool than anything else for a few years. I went to the Dublin Googleplex a couple of years back and while I noted the much vaunted ‘fun rooms’ I also noted that they were entirely devoid of staff. Even back then, that struck me as a company playing lipservice to fun but where the actual culture was a whole lot more professional and business focussed.
As I noted last week, the closure of Google Health and Google Power Meter, the end of the Wonder Wheel and the new interface in general says that Google is growing up. Like any business there are bits which make money and bits which don’t. The remorseless logic of commerce says: “bin the bits that don’t”.
It’s interesting to contrast that with the likes of Groupon (“in the toilet“) and even Twitter who are still living in a dotcom, IPO mindset. Google is a proper business beholden to its shareholders, and pissing money away on fun and non-commercial frippery never plays well with investors.
Their stake in the ground is this: search and social. Google+ now looks like a lot more serious play than it did even when it launched. While other projects get the chop, someone is staking their reputation at the company that they can go toe to toe with Facebook so it’ll be interesting to see how Google’s attempt at land grab goes. While they talk it up as a serious long term investment, the clock is already ticking (and personally I don’t think it last. I will eat this blog post if I’m proven wrong).
What can we tell from this? That Google should be bracketed alongside Microsoft – if it isn’t already – as an infrastructure rather than a mere supplier. The next time they ban a site and tell you that it’s in the interests of users, don’t buy it: everything is in the interest of shareholders now – even stiffing legitimate sites to generate headlines.
You wanna play on the internet in 2011? Make friends with Google and take what they give you.