{"id":576,"date":"2011-07-20T09:39:25","date_gmt":"2011-07-20T17:39:25","guid":{"rendered":"http:\/\/blog.nexthop.ca\/2011\/tech-bubble-redo\/"},"modified":"2011-07-20T09:39:25","modified_gmt":"2011-07-20T17:39:25","slug":"tech-bubble-redo","status":"publish","type":"post","link":"https:\/\/nexthop.ca\/it-news\/tech-bubble-redo\/","title":{"rendered":"Tech bubble redo"},"content":{"rendered":"<div class='posterous_autopost'>\n<p>It&rsquo;s easy to get a feeling of deja vu these days. <\/p>\n<p \/>Every week delivers big news of another tech IPO. We hear about super-sized valuations for companies that haven&rsquo;t turned a profit. Sounds familiar doesn&rsquo;t it? It has a certain late 1990s flavor.&nbsp; Are we experiencing another tech bubble? A reprise of <a href=\"http:\/\/en.wikipedia.org\/wiki\/Dot-com_bubble\">dot-com mania<\/a>? <\/p>\n<p \/>If you&rsquo;re foggy on the meaning of tech bubble, here&rsquo;s <a href=\"http:\/\/www.investopedia.com\/terms\/t\/tech_bubble.asp\">Investopedia&rsquo;s<\/a> definition: <\/p>\n<p \/>&ldquo;<strong>Tech Bubble<\/strong> &#8211; a pronounced and unsustainable market rise related to increased conjecture in technology stocks. A tech bubble is highlighted by rapid share price growth and high valuations based on standard metrics like price\/earnings ratio or price\/sales.&rdquo;<\/p>\n<p \/>So should we be concerned? Is history doing it&rsquo;s thing again &#8212; repeating itself? <\/p>\n<p \/>You might think so when you scan headlines. Let&rsquo;s go through the list of recent and impending IPOs that have made news lately: <a href=\"http:\/\/LinkedIn.com\/\">LinkedIn.com<\/a>, <a href=\"http:\/\/Pandora.com\/\">Pandora.com<\/a>, <a href=\"http:\/\/Groupon.com\/\">Groupon.com<\/a>, <a href=\"http:\/\/Zynga.com\/\">Zynga.com<\/a>, <a href=\"http:\/\/Twitter.com\/\">Twitter.com<\/a>, and <a href=\"http:\/\/Facebook.com\/\">Facebook.com<\/a>. <\/p>\n<p \/>Are investors irrationally joyful about these companies? Perhaps. Consider that Pandora and Groupon aren&#8217;t profitable. LinkedIn posted its first profit ($12 million) last year. Twitter has managed to generate a little net income, nevertheless the social network is still trying to find a long-term moneymaking strategy. On the plus side, Zynga and Facebook, which are expected to go public soon, are pocketing big profits. <\/p>\n<p \/>(But is the maker of Farmville really worth several billion dollars?)<\/p>\n<p \/>What about the businesses that aren&rsquo;t making much or any money? Are investors crazy to pour money into them? Maybe, maybe not. Remember, profitability today is not the same as profitability tomorrow. <a href=\"http:\/\/Amazon.com\/\">Amazon.com<\/a> didn&rsquo;t post profits until 2004 &#8212; nearly 10 years after launch. But now the organization takes in money by the truckload. Last year the Amazon&#8217;s net income exceeded $1 billion. <\/p>\n<p \/>So who knows, maybe Twitter will find a way to parlay its big user base into a moneymaking machine, a la Google and Facebook. <\/p>\n<p \/>If you&rsquo;re concerned, you might find comfort in Jolie O&rsquo;Dell&rsquo;s recent Mashable column, which points to some important differences between the today&rsquo;s tech climate and the dot-com era. To begin with, the number of tech IPOs in 2011 (25 so far) pales in comparison to 1999 (308), the height of the dot-com bubble. <\/p>\n<p \/>Another difference is quality. In 1999, you could take a vague idea, write a half-baked business plan (or not), and <a href=\"http:\/\/www.cnet.com\/1990-11136_1-6278387-1.html\">somehow convince investors to throw money at you<\/a>. This year&rsquo;s crop of IPOs are extremely buttoned up in contrast. <\/p>\n<p \/>But there&rsquo;s still <a href=\"http:\/\/www.washingtonpost.com\/blogs\/innovations\/post\/the-tech-bubble-is-coming-prepare-yourself\/2011\/06\/30\/AGWY6PtH_blog.html\">reason to fear a bubble<\/a>, even if things have changed since 1999. <\/p>\n<p \/>If Limp Bizkit stages a comeback, I suggest hitting the panic button. <\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>It&rsquo;s easy to get a feeling of deja vu these days. Every week delivers big news of another tech IPO. We hear about super-sized valuations for companies that haven&rsquo;t turned&#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-576","post","type-post","status-publish","format-standard","hentry","category-business-technology"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Tech bubble redo | Next Hop Solutions<\/title>\n<meta name=\"description\" content=\"Tech bubble redo. 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