The internet IPO needs to make a comeback
An IPO (initial public offering) can be a lucerative way for companies to rise a lot of money, as well provide an ‘exit’ plan for the founders and early employees. IPOs also allow individual retail investors like you and me to partake in the company success (or possible failure) by purchasing ‘overnership’ of the company in the form of shares. If the company does well, the shares should rise and you, the investor, make money. In the 90’s stock market boom dotcoms strived to go public. Now with the rise of web 2.0 and social networking we’re in a second internet boom, but there are no web 2.0 IPOs. Not a single one.
There are many reasons why there havn’t been any web 2.0 IPOs. During the last dotcom boom retail investors and venture capitalists lost billions of dollars from investing dotcoms. Mopt of the dot coms that went public between 1997-and 2000 lacked a sustainbale business model and were hemorrhaging money. Even successfull IPOs such as amazon.com and yahoo.com drained investors when the dotcom bubble burst. In addtion, the SEC has imposed various new regulations since 2000 such as Sarbox Oxley which makes it more difficult for companies to go public, as well as requires more stringent financial statement reporting in the wake of the Enron and Worldcom scandals.
But if you look beyond the negatives IPOs offer a lot of benefits, and now may be the best time for web 2.0 companies to go public. Unlike the previous internet boom, the majority of web 2.0 companies are profitable and are experiencing rapid growth. The potential is abolutely huge, especially considering the enourmous hype surrounding web 2.0 companies.
If facebook went public it could easily attain a market capitalization of 30 billion or more within a month, exceeding that of Yahoo.com. Infact, I would buy as many shares as possible of facebook if it public without even giving it a second thought because the potential is so great. Sure, this may seem like financial suicide, but actually it isn’t as I will explain.
But what about excess hype and bubble valautions? Internet companies have always traded at a premium valuation. While the mean PE (price to earnings ratio) of companies on the S&P 500 is around 17, internet companies have an average PE of around 30-50 because those comanies are growing at a more rapid rate than offline comanies and thus usually trade at a premium. While this may increase the risk, it also substantially increases the potential upside for investors who are less risk averse.
For example, in 2005 bidu.com, a chinese internet portal, went public at $27 a share but closed the day at a whopping $120 a share with a PE ratio of around 1,500. By any metric this stock was greatly overvalued. So there should have been a huge collapse if history is any indicator because this company was so overvalued. While bidu.com did selloff in the following months, by late 2006 it began to rebound as investors gave bidu.com a second look, as it’s revenue and growth was staggering. By mid 2007 the stock traded above $200 and now trades above $310 with a PE ratio of just over 150. While the stocked nearly trippled from its IPO closing price its PE ratio fell by 90%. In the span of nearly three years bidu.com earnings increased by a mind blowing 2,500 percent or 26 fold. There was NO bubble, no huge selloff, no implosion. Why? because bidu’s business is rock solid unlike many of the companies in the 2000 dot com bubble. Thisis also why a facebook IPO would be a goldmine for investors.
If facebook, twitter, digg.com or any other successful web 2.0 company went public it could reap the same windfall as bidu.com. Had bidu decided not to go public due to ‘bubble’ fears it wouldn’t be valued at $10 billion dollars as it is today. Had google not gone public the company woudn’t be worth $270 billion dollars, nor would google have had the resouces as it has now by raising capital by selling selling shares. By going public companies can ’sell’ shares to public to finance acquisitions and reseach.
Instead of succumbing to irrational post dot com bubble fears, companies need to let the marketplace decide the value of their companies. Since we’re in a second internet boom and given the staggering growth in online advertising and internet usage there from a financial standpoint is almost no excuse not to.
Best and worst ways to promote your new blog
From personal expeirence and common sense here are the best and worst ways to get traffic and promote your new blog. While most lists include only the methods that work, I have decided to include those that aren’t as effective you will be able to avoid them.
In order from most effective to least effective:
1. Forum signature link. This is by far one of the most effective ways to get traffic to your new blog. As an added bonus a forum signature link can help your blog get spidered by the search engines. Nearly any forum will allow signature links and sometimes you can add multiple links. A good signature link should be written to capture someones attention. Since signatures are short, your words must be descriptive and suspenseful. A good title would be “Why does your website suck?” A mediocre one would be “How to make your website better”. The first headline is more likely to grab the reader’s attention because people tend to be more receptive to negatives than positives.
2. Link exchanges to related blogs A link exchange with a blog similar theme as yours can provide a steady stream of traffic and search engine spidering with little work. After you have written several quality pages of blog content, send an email asking for a link exchange. Put his link on your blogroll first before sending the email to increase the odds of success.
3. Write an article for a forum Join a forum become a productive contributing member. (Don’t forget to add your signature link!) After making a week’s worth of constuctive posts and establishing yourself as semi-knowledgeable member create a separate thread promoting your blog, but do so in a subtle manner. Begin by creating headline like “Dell releases new gizmo!” Then in your own words write a paragraph about the gizmo, and at the very end of the post include a link to your blog which has a complete summary of the new gizmo. This method will drive a lot of traffic if done properly.
4. Contribute to other blogs This method isn’t very effective most of time since most blogs don’t have many readers and the blogs that have a lot of readers your link may be overlooked. Some bloggers may not allow live link in comments, but a lot of bloggers will alow you to hyperlink your username to your website in every post. Most readers don’t read all the comments and of those, few if any will click your username.
5. Traffic schemes Recently there have been a surge in various blog traffic exchange programs such as Blogrush, Blog Explosion, and many other traffic generating schemes. I don’t recommend any of them. The problem with these systems is that they tend to operate though pyramid scheme where in order to move higher up the list you must recruit other people to join. While these programs my send a lot of traffic, in order to benefit you must be high on the list, which excludes 99% of people who join. The blogs that are most likely to benefit are the largest blogs, but if you’re blog doesn’t have many readers you won’t get much if any traffic.
6. Blog search engines. There are dozens of blog search engines and aggregators and I have found that none of them generate any appreciable traffic. The probalem is that the number of blogs indexed in these search engines VASTLY exceeds the number of readers. The blogs that are likely to benefit the most from blog search engines are large blogs since they will be ranked higher, while smaller blogs are buried in the fray.
7. Search engines. Unless your blog is established, getting search engines traffic is exceedingly difficult. Iamned.com has dozens of pages of original content, yet generates a meager quantity of search engine traffic.
While this list is far from comprehensive, it will provide a good starting place for anyone who wants to promote their blog.
For better or worse, a new era has begun?
We are in a new era. An era of hyper capitalism, spendism, smartism, consumerism, monetizationsism, materialism, paymentism, and verificationism. Never before in the history of industrialized society has there been such rapid technological and social change. People are spending more, saving less, technological breakthroughs are being made every day, millions of people from all over the world pour onto the web. We’re in a high tech web 2.0 boom. A global economic boom unlike any ever soon before. Brazil, India and Chinese economies rapidly developing. Emerging market now lead the way, where as in the 90’s the United States was the premiere center of growth.
Millions of Americans are on anti depressants and that figure shows no sign of slowing. Unable to cope with the rapid social and economic changes affecting their environment citizens of industrialized nations seek escapism in the forms of vices and self medication-alcohol, tobacco, drug use, pornography.
To be continued…
Social networking website valuations aren’t bubbly
Recently, there has been a lot of speculation and debate on many webmaster forums and conferences regarding the valuations of web 2.0 social networking sites, mainly facebook. I have speculated that facebook could be worth one trillion, and while that figure may seem very absurd, few people are willing to accept that facebook could be worth just $15 billion. That number seems so outlandish to most people of the tech industry who still have vivid memories of the 2000 dotocm bubble, and therefore regard these recent valautions to be the manifestations of a second bubble.
However, facebook’s 15 billion dollar valaution is not excessive, and we’re not in a web 2.0 bubble. Instead, we’re in a web 2.0 continuum. The valuations for the top web 2.0 social networking sites will only grow in the coming years, with 2008 being a stellar year.
Also, a lot of naysayers seem to forget that facebook, myspace, youtube have MILLIONS of users, MILLIONS in ad revenue, are very profitable and can be treated as full fledged media companies like CNN or News Corp which have audiences of similar size.
The web 2.0 continuum will begin with google, yahoo or microsoft aquiring another piece of facebook in early 2008. Maybe 2-10% stake will be aquired for billion of dollars. This will make huge headlines and further bolster the valuations of these web 2.0 companies.
I have written how the top websites aren’t at risk for being displaced. What this means is that facebook, myspace, twitter, photobucket, google, youtube and other popular sites WON’T be superceded by newer sites. Why is this important? Because it further gives justification for the ‘high’ valuations of social networking sites. Since these social networking sites aren’t at risk of being displaced they will only continue to thrive.
I have written a few weeks ago how it is no longer viable to create a web 2.0 site due to market saturization. Since nearly all new web 2.0 websites are slated for failure according to my arguments, that will further enable the current web 2.0 leaders to keep growing and apreciating. My post “Why making money online generally sucks” also elaborates on this point.
Overall, the web 2.0 bubble doomsayers will be wrong in 2007-just like they were wrong in 2007, 2006, and 2005. When Fox aquired Myspace for $560 million it was considered to be indicitive of a bubble, but now myspace is worth $10-16 billion and revenue has exploded in that time.