Maybe I’m just ignorant about how social media companies are valued, but WhatsApp was purchased for $20b, Snapchat turned down a $10b from Alibaba.
Meanwhile, all 700 Family Dollar stores and all its distribution centers is only going for $9b.
Am I missing something here?
I’m not defending those valuations, but what is email worth? A whole heck of a lot. Email is the Internet communication standard and virtually everybody uses it. But it’s not as rich as it could be.
I think a lot of these companies (led by FB) are trying to set the new communication standard. The value of a service that completely replaces email (and maybe standard telephony) would be pretty huge.
Valuations are scary high in the space I’m in. I sense a mean reversion sooner rather than later.
While those internet stocks do seem expensive outwardly, couldn’t you have thought of a better example than Family Dollar Stores?
The valuation is what Google and Facebook are willing to pay. These are strategic acquirers, and these assets are worth differently to them than to you. If you have a cool messaging app with millions of users and fast growing popularity, you know you can sell it to a big fish…and you price it accordingly.
Yellen shares your concern. Take that for whatever it’s worth
This reminds me of someone who snickered at the “fools” who invested in Uber at an $18bn valuation, which is almost more than all the car rental companies, which actually owns cars, are worth.
What people fail to understand is that these companies are valuable percisely because they are asset-light businesses.
So, these companies are worth a lot because they have no assets.
Got it.
Does that make me worth a lot, too?
I heard a lot of that as the dot-com bubble grew.
I don’t follow FB, but I have to assume that their end game is to revolutionize the way we communicate. I use FB as an email client with my friends where I never have to worry about spam or knowing their email addresses, which is great.
Damadoran had an interesting discussion on the Uber valuation on his blog.
My point was that comparing a legacy consumer goods retailer like FDO to Whatsapp is comparing apples to oranges, a la Hertz to Uber. Not only are the business models completely different, but FDO and HTZ are subject to massive disruption in their market places by more innovative companies/concepts such as Amazon and ride-sharing.
edit: Also, there’s a reason why companies are valued on earnings or revenues, not assets. Borders had plenty of assets when it went bust.
What the hell is asset light?
Unless you’re a distressed investor, in which case assets mean just about everything.
I think their end game is *control* the way we communicate. Access to everybody’s communications is pretty valuable, big data-wise. But I still think it’s a lot less valuable than what Google has going (capturing your direct thoughts rather than person-to-person communications).
fb gonna hit 100 soon