Enough With The Money Obsession, OK?

Posted by: Rob Hof on October 03, 2007

Seems like everybody’s talking about how much more tech companies are worth than you think they are. Henry Blodget—yes, that Henry Blodget—thinks Google could hit $2000 a share. Facebook might be worth $10 billion-plus, if rumors about Microsoft’s interest are true. TechCrunch, the uberblog about new Web companies, could sell to CNET for $100 million, suggests Douglas McIntyre at 24/7 Wall St.

OK, so Silicon Valley is almost as much about the money as the technology. All I know is, when people in the technology biz start talking numbers more than ideas, you know something’s out of whack.

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It’s not even that all these numbers are entirely ridiculous. Could Google stock reach $2000 in years or even decades, as Blodget suggests? It’s already at $583, so why not? Of course, that stock almost certainly will take quite a roller coaster ride in coming years, and you’d be better off investing in index mutual funds as Blodget also suggests. But how ridiculous would a $600 Google share have sounded three years ago when the company went public?

Facebook for $10 billion-plus? Yeah, that seems a bit much. Unless you’re buying just the 5% piece Microsoft might be considering. In which case it’s chump change.

TechCrunch for $100 million? Completely ridiculous. (Just kidding, Mike!) I doubt CNET is in a position to pay that much, since that’s almost 13 times its 2006 profits. (And anybody that does buy it had better hope TechCrunch founder Mike Arrington himself stays on, because once he’s gone, so are my and many others’ TechCrunch feed subscriptions.) But given the blog’s following and reader engagement—what other blog gets so-o-o-o many comments?—the valuation doesn’t seem outrageously out of line.

But all that’s beside the point. I guess money is an easy proxy for importance in technology to anyone who isn’t paying close attention to it. But we’ve seen this obsession with valuations before, and that movie ended badly. Let’s get back to the garage.

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Reader Comments

ganja

October 3, 2007 05:20 PM

Well, I have a different theory which is more main street'ish.

My theory is when the cab driver or the local hairdresser begin to talk stocks or business trends, it is a bad sign. I recall how cabbies were talking like stock gurus in the late '90s.

Similarly when a certain hot topic begins to dominate the conversation in middle-class social events, it is a bad thing. For instance in the late '90s, startups and stock options and then stocks were the toast of all party conversations. In 2004 and 2005, it was housing and how everyone out there was buying multiple homes. Now seems like everyone is back to talking/chasing profitless startups. You are right, this will end very badly.

chip

October 4, 2007 05:21 AM

I quite agree with ganja, too much of a good thing is not particularly good. In fact it results in an overkill. I feel that's what happening today with so much of activity in the social networking space. I have one query though, what will happen in say five years as far as newspapers are concerned. Will they be redundant and will people receive their news from blogs instead?

Matt

October 4, 2007 11:17 AM

I guess it comes down to a question without a simple answer -- is the company worth some multiple of earnings or is it worth what someone else is willing to pay for it?

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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