Forbes: The Second Internet Bubble Is Over

Forbes just published a story entitled With Facebook’s Earnings, The Second Internet Bubble Is Over.

“Facebook shares “are slated to open on Friday at their lowest level yet and will likely end up being valued about 1/3rd less than they were at IPO time. It’s a stunning fall that will have massive consequences from Silicon Valley to Wall Street.”

“The disappointment, of course, is not just contained to Facebook. Many of the hottest tech companies touting social networking attributes and online business models pegged to a new and more mature Internet economy have been stock market disasters.”

The story then goes on to chat about Zynga, which is currently trading just over $3 and Groupon.

The story concludes:

“Facebook, Zynga and Groupon were priced for perfection, but they have turned out to be anything but perfect.”

You can read the whole story here

Comments

  1. Orangelo says

    That’s what they get for being so greedy and raising the IPO price at the last minute.

    Good for them. I’m happy to see them burn for trying to fleece everyone.

  2. Louise says

    when you stripped out share-based compensation related to the IPO and payroll tax expenses that net profit got to $295 million. That shows some growth, as did quarterly revenue figures that climbed from $885 million to $1.18 billion.

    - Forbes
    Facebook should have been priced $24.00 going in. I predict the stock will turn around tomorrow and rocket up! If I’m wrong, I’m going to limit comments to the 3D thread on theDomains for a year!

    Talk about 3D

    Revenue for the second quarter soared 52% up to $83.6 million . . . The growth was primarily driven by a 112% increase in printer units sold.

    3D Systems reported HUGE revenue, but the stock was still down. That one is going to rocket up, as well.

    The market artificially suppresses stocks, until it has enough buys queued up to start a trend.

    Yes, I think the guys on the floor coordinate to start trends up and down. Just now for Facebook and 3D Systems, they were coordinated down, so more insiders could profit from the explosion you’re about to see.

    If I’m wrong, I’m going to limit my comments to the 3D thread from now on!!! :D

  3. J says

    Social media is almost worthless as means of marketing. So all social media stocks are perpetual shorts. Groupon, groupon clones, and all flash-sales sites also offer negative value to advertisers, so long-term they are all going down.

    It is not about internet bubble, but social media bubble and groupon/flash-sales bubble.

  4. BrianWick says

    But don’t confuse bubble with lack of common sense – whether its buying stock in a company whose users expect things for free like ZYNGA or Facebook or speculating on non.com’s in the next year – like:
    Bankrupt.shop
    NoButIAmOnTheGroundFloor.RealEstate
    IAmASucker.Homes

  5. Paul says

    I knew FB was going to bomb. Glad it did. I’m so over all the Zuckerberg-hype. MySpace looked like a more entertaining platform. Then FB came along and MySpace died.

    Personally, I hope this slaps some reality back into the social media hype. Why do we have to be so social? Anyone? I mean, my God. Tweet this, poke that. When did we all turn into a nation of 14-year-old teen girls?! Desperate for attention. Look at me. Friend me. Check out my profile. Thumbs sore from texting all day long.

    Let me make it perfectly clear… I don’t want to know you! I don’t care about your family vacation or that irregular looking bump on your back. I don’t need to know you’re headed into the bathroom. I don’t care!! This is as social as I get… posting an opinion to a news story.

    Wish the World would just grow up.

  6. dmpartners says

    The Next internet bubble will be 3D.coms ladies and gents you heard it here first. Glasses Free 3D Computers will be the next hottest trend Look for 4k 3D Holograms and advertisements to rule the airwaves, As soon as 1 item reaches out of the screen and people go to grab it 3D will be off to the races. I can see 3DVodka.com hologram ads all over the internet, 3DMartini.com with Martinis being made and poured in 3D No Glasses just pure high resolution 3D computer monitors. The domainers with brandable 3D.coms will be the big winners, No more glasses and no more excuses 3D Holgrams are coming and will explode the internet once again.

  7. Anon says

    Usually, it takes a generation or two for people to forget history.
    Here, it took about a decade.

    I’m pretty sure a large part of the unexpected cash infusion into tech over the past few years came from all the money being taken off the table in 2008. So much cash has been sitting on the sidelines looking for a place to go, the old strategies from 1998 got dusted off, rinsed down and motherfuck us all but they worked again.

    This isn’t just publicly traded companies, either.
    The objective of 99% of all startups is to one day get eaten by a bigger fish, while enjoying fat VC funded salaries (and the autonomy to play ping pong and XBox all day on the company clock) in the meantime. Figure out something that appears to service some ‘need’, develop a reasonably stable application for it, get people using it then sell off for some insanely inflated multiple.

    Tech over the past 15 years has always been about the glorious exit, the golden parachute, building it up, passing it off then bailing before it burns down. What’s so crazy is that the obvious lessons learned in the first part of the past decade were so clear, it’s unfathomable that so many people couldn’t (and still don’t) recognize eLipstick on a digital pig.

    I think it all goes back to people just not ‘thinking’ right.
    The first thing you should always estimate is the motivations of your counterparty. Pay no mind to what he ‘tells’ you. There’s a world full of magicians who can make a woman float across the stage. When you dissect a mans motives, you get an entirely different picture. The motives of tech are what they are and as long as nobody realizes it, they’ll continue to pick the pockets of every idiot with a high risk tolerance and more money than sense.

  8. says

    @Shane

    Apple is a mature stock so the lower p/e is quite understandable. Does not mean FB should be in the same range.

    At any rate, stocks are long term investments (7 to 10 yrs). I don’t see how the Forbes writer can equate FB’s low performance to a “bursting” bubble.

  9. SF says

    Another Forbes article which discusses a fundamental change that is about to take place in VC, IPO’s and Investing:

    http://www.forbes.com/sites/chancebarnett/2012/07/26/will-crowdfunding-for-businesses-succeed-or-fail/

    See: Jumpstart Our Business Startups Act (pdf):

    http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf

    Note: Title I – referencing EGC (Emerging Growth Companies)

    Note: Title III – referencing Crowdfunding

  10. Anon says

    “At any rate, stocks are long term investments (7 to 10 yrs).”

    Show me a man who chants mantras like this, I’ll show you a man who has no business managing his own money.

  11. BrianWick says

    Adrian Keys –
    “I don’t see how the Forbes writer can equate FB’s low performance to a “bursting” bubble.”

    You cannot confuse having sex with your vibrator (oops faebook device for the brain dead) with what puts dough on the table – but I am entertained however.

    Point is fundamentals never change – no matter what gets you off :)

  12. says

    @Shane: Pretty common number among those who really know P&E’s; my own business partner has predicted $18 before it’s all over, too. I’m not terribly experienced when it comes to the stock market, as it seems like a mess of hocus-pocus to me.

    However, I must say anyone with a grip on reality could have predicted some of these recent disasters. Just because it’s the web doesn’t mean traditional finance models don’t apply. That’s how the first bubble happened, after all. “Gee, we have a new way of doing it!” NO you don’t; you just have a new medium.

    As for who made money on these IPOs: The investment bankers are the ones who made the money. The more hype, the more speculative money flows in, which drives UP the price of the IPO. Since any fortune Mr. Zuckerberg could claim would be tied to the valuation of FB, the lower the price, the less he gets. And he can’t do anything with the stock right now, anyway.

  13. says

    I still think companies like FB and Zynga priced their IPO’s right, the goal for them was to sell shares to the public and raise cash, which they did.

    Ofcourse it looks bad now that the shares are down, but they still raised all that cash onto their books.

    The bubble of 2000 was when internet companies weren’t making or barely making any revenues, now these social media companies have significant revenues, and they’ll ebb and flow over time. I think companies like FB, Zynga and Twitter will be able to hold on and grow, Groupon not so sure about. When revenues/profits increase in a future quarter, shares will go up again. These companies will have more ways to grow revenues than we even know about now.

  14. says

    @@Domains

    I totally agree. I don’t see how such a “high-powered” team of advisors could all buy into faulty pricing. The goal was to raise a certain amount cash which they all did…the fact that an investor is down a few months after the listing does not say the offer/company is a failure.

    @Anon – but that’s the very point I am making. The money that I manage would not find its way into the FB IPO as I do understand that stocks are long term investments.

    Even more, no one has a good model for how a “social media” stock behaves, so how about another mantra….”only time will tell”….

  15. says

    Hello MHB

    When I was an institutional Broker, the inside joke on Forbes was they were “Wrongway Doolittle”

    They could not be more wrong on 2nd. Internet Bubble, because there is no such thing as Internet Bubble as compared to 99 2000 debacle. Just because FB is tanking is no reason to lable anything remotely close to a BUBBLE.

    Facebook is tanking because Zuck is a Dirtbag that is a Billionaire that followed questionable moral standard decisions in order to steal his way into the limelight. You can look back to day one inception and the unfolding events that followed to realize what I am saying is true. So many people are blinded by greed over fairness and their end result is never good.

    “What comes Around Goes Around”

    I said in past comments 10$ for FB was highly overstated on a fundamental basis and remain with that opinion.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  16. Louise says

    Piper Jaffray analyst Gene Munster predicted great things for Apple stock when it traded at its high December 2009, based on the iPod, iPhone, and news about the iPad.

    Gene Munster says about Facebook

    Ignore the headline numbers in Facebook’s latest earnings report . . . when you dig down you’ll find “57% of Facebook users access mobile.”

    - Buy Facebook? If You Don’t You’ll Regret It: Pro
    http://www.cnbc.com/id/48355891

    Famed venture capitalist Roger McNamee 2nds that opinion

    McNamee, famed venture capitalist, says “The genius of Facebook is Facebook Connect.” That’s the feature that allows people to log onto all sorts of other sites using their Facebook credentials

    “That makes the entire internet an extension of Facebook,” he says.

    The next evolution he says, will probably be in mobile – an area of technology that’s at its infancy.

    “The opportunity there is much greater (than Facebook on your desktop) because Facebook can make it incredibly convenient to make payments using a mobile device.”

    -cnbc

  17. says

    @ Louise

    Fair enough, but this does not answer the moral fiber questions involved with Management. Your word and trust are far more important than the next paid for news bite from some hired gun marketer that has a vested interest in seeing FB go up.

    The truth of the matter is the smart fundamentally based money is not buying this news fluff.

    By the way I own no positions nor have any of my clients been advised to buy this fundamentally flawed issue called Facebook.com

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  18. Louise says

    Gene Munster predicted Apple would rise when it was still $200.00 per share, and people thought it had peaked, so I’m going to trust Gene Munster!

  19. Anon says

    Gene Munster predicted Apple would rise when it was still $200.00 per share, and people thought it had peaked, so I’m going to trust Gene Munster!
    ———

    Your thought process couldn’t be any worse.
    Joe Lewis kept doubling down on BSC, too.

    History is littered with people who use the lone credential of “getting it right that one time” to purvey shitty advice for the rest of their lives.

  20. says

    @ Louise

    Good luck you will need it at this rich premium level. We would suggest possibly buying it as it approaches 10$ but even then beware!

    We expect them to lose many fans of support along the way. This includes companies support as well. The momentum is Institutionally against you . Watch out.

    Gratefully, Jeff Schneider (Contact Group) (Metal Tiger)

  21. Louise says

    Buy now! Facebook is going to rocket up!

    Not Friday, maybe not Monday, so I have to go back to the 3D thread.

    Gene Munster predicted new highs for Apple; then Apple tripled from its high of $200.00. Facebook has real users, not just a handle and an email address. If Facebook goes up and down a few dollars, it doesn’t matter – this it the time to buy!

    Comments here are negative about Facebook

    CBS Nightly News did a piece on Facebook’s decline in advertising after which Scott Pelley made a verbal swipe against it:

    Facebook progress hindered by advertising
    cbsnews.com/video/watch/?id=7416276n

    USAToday posted something negative

    Facebook’s stock plunge highlights fears about growth
    usatoday.com/money/industries/technology/story/2012-07-27/facebook-stock/56525044/1

    and CNBC personalities debated the merits of ousting Zuckerbert.

    When sentiment is this negative, NOW is the time to get in!

  22. BillW says

    re: Facebook-

    Probably NOT a good time to buy unless you are a bit of a gambler…..my understanding is that on August 20th the first insiders “lockout” period will expire and Facebook “insiders” can start to sell some of their shares; there is a second lockout occurs 90 days after that. There are a lot of tax advantages to sell in 2012 vs. 2013 as the Bush tax cuts will expire and that is another motivator as well. There are better stocks in this space and much, much, much less risky.

  23. Back in the real World says

    Jeff Schneider –

    “We would suggest possibly buying it as it approaches 10$ but even then beware!”

    1st time I agree 100% with Jeff. I can see it getting down to $10.

  24. John says

    “At any rate, stocks are long term investments (7 to 10 yrs). ”

    It’s obvious you have no idea of investing. For me long term investment is 1 – 2 months and if you think I am stupid in the last 6 years since I started investing full time my average return is 35%
    a year and this is better than W. Buffett (I never had a losing year)
    I am not a daily trader but I trade often

  25. says

    @John

    Easy John…it’s no guesswork.

    Long Term Investment

    “In general, an investment instrument (bond, debenture, preferred stock/preference shares) that matures in more than 10 years.”

    Read : http://www.businessdictionary.com/definition/long-term-investment.html#ixzz224ZL6sM5

    All the other books/definitions will say the some thing too. John, we do understand context…FB could have provided a flip opportunity and return 100% in a month or 2 and maybe a lot of folks were counting on that. The fact that there was none does not make the company/stock a failure.

  26. says

    I’m not surprised that Facebook has tanked. I am not an investor (outside of domains), but I wouldn’t have touched that IPO with a 10-foot pole. A site is only as good as what it offers its users, and Facebook seems to be taking the same path that Myspace did. People are annoyed by the constant layout changes and privacy issues, and FB is becoming unnecessarily complicated.

    The news that they are in talks with banks to offer payment processing and compete with Paypal is disturbing. Do you really want all of your financial details in the same place as Farmville, your 8th grade photos, and your timeline? Facebook should stick to what it does well – there’s always a tipping point when companies try to “be everything to everyone,” and although FB (and let’s face it, Google) want to be one-stop shops for all of our needs, if they become too broad, and diluted, there will be a backlash.

  27. Louise says

    @ Nadia

    FB (and let’s face it, Google) want to be one-stop shops for all of our needs

    Facebook, Google, Apple, Pyapal, eBay, Amazon, Disqus, Livefyre, Sprint, AT&T . . . I feel safer with Facebook . . . At least, it’s a level playing field, where all the signups are individuals!

  28. BrianWick says

    “Buy now! Facebook is going to rocket up!”

    At $22 a share today – that is less than 50% of the $45 stike it hit after the IPO.

    Entertaining the brain dead (who have no money) on their iPhones and Droids with free stuff was a stoke from day one.

  29. Louise says

    @ Brian

    Entertaining the brain dead (who have no money) on their iPhones and Droids with free stuff was a stoke from day one.

    You’re smart – I study your comments with pleasure! Ususally, you’re right! With Facebook, I beg to differ.

    Facebook has great fundamentals. While sentiment is strong against Facebook, savvy investors are looking to get back in, but it may not be before the lockup is over, that is, the “ban on share sales expires next week.”

    August 16th, the ban on share sales for institutional investors who got in before the IPO expires. After that fallout, Facebook is set to explode.

    The Motely Fool wrote something positive about Facebook, and even Microsoft went on record saying it doesn’t intent to sell its shares.

    Microsoft Said to Plan Holding Facebook Stake as Lockup Expires
    http://www.sfgate.com/business/bloomberg/article/Microsoft-Said-to-Plan-Holding-Facebook-Stake-as-3780392.php

  30. BrianWick says

    Louise – Just like the Green Bay Packers and Man U – some folks just need to own a few shares to put on the mantel.

    Also – I read something somewhere that for facebook to equal Google in terms of P E, (or whatever) the stock would need to be at about $9 a share – and then add to that trying to sell stuff to folks that have no money. It is just a slow kill – but then again I am not in the market – I invest in my own businesses and therefore do not have to follow the knowledge coming from the “experts” at CNBC.

  31. says

    “The Second Internet Bubble Is Over”

    An emotive statement to be sure, but Facebook, Groupon,
    Zynga et al are not really representative of the Internet.

    If all of these sites went bust the web would just carry on as
    before, as if nothing had happened…

  32. Louise says

    @ Brian Wick said:

    do not have to follow the knowledge coming from the “experts” at CNBC

    You call them “experts?” The CNBC crew are entertaining, but ANTI- facebook, calling the IPO “the Facebook debacle,” watching how far Facebook is falling, as you and the commenters here, so you’re assertion is wrong. I’m using them and your opinions to predict the SURGE in Facebook shares. That is not the slight retracement from being oversold we are seeing.

    Let’s wait until after the 16th. :)

  33. Facebook Is Due to Surge says

    @ BrianWick, I’m sorry. You meant, Gene Munster, who was interviewed on CNBC, as the “expert” I was referring. Let me clarify: the CNBC announcers, though well-meaning, seem to follow the herd. They are negative on the economy when the market is down, and perk up when stocks rise. It’s fun to anticipate the opposite of what they say.

    Roger McNamee & Gene Munster, who have nothing to do with CNBC, but have their own firms, made sense to me in what they said, being positive on Facebook.

    That’s all I have to say until AFTER the 16th.

  34. BrianWick says

    My guess is the only people buying facebook stock and even keeping it where it is at $21 are averaging down and down and down – so they can get out at 25-26 or so.
    Reality is 30% of IPO or $12 – just like the losers at Zynga..
    It is a fad

  35. Louise says

    @Brian Wick asked:

    Facebook Is Due to Surge –
    still waiting ?

    Yes. Holding steady or up a few cents is not what I am talking about. I’m talking about A ROCKET TO THE STRATESPHERE.

    However, because it is later than I predicted – true to my resolve – I have limted my comments on theDomains to the 3D thread. It takes something most business people are unacquainted with: restraint.

  36. Louise says

    Facebook stock maybe hit bottom. Here is a chart with a couple indicators I added.

    This is what I commented, way back on May 18th on Morgan Linton’s article about Facebook’s IPO

    The valuation seems to high – of course, it’s easy to be hindsight quarterback! The underwriters were bolstering it up at $38.00. Why not wait six months until it takes a beating to get in at a good price? Then you would take a position of strength in your long-term view of Facebook.

    The largest block of shares held by insiders and employees unlock in November – I guess that will be the final shakeout.

  37. Louise says

    Let’s revisit Facebook.

    Hi, Brian!

    September 4th saw FB close: 17.73

    Two higher lows were reached since:

    18.98 on October 18th
    19.21 on November 9th.

    Today FB closed at: 26.36.

    Support seems to be the 19.00 level, and the lows have been higher than September 4th – FB seems to be rising!

    It doesn’t hurt major lockups are past . . . Had a feeling serious investors were waiting out the lockups to put their $$ in.

  38. Paul says

    @ Louise

    You’re entitled to your opinion, but as someone who used to work on Wall St. it’s always obvious to me when someone is pumping a stock.

    A word to the wise, when someone uses verbiage like “A ROCKET TO THE STRATESPHERE.” run, do not walk, to the nearest exit. Anyone worth their weight in salt doesn’t use language like that. People trying to pump up stocks use language like that. Often, they’re shorting the very stocks they’re promoting.

  39. BrianWick says

    Louise –
    I figured this thread would get an “I told you so”

    Yes – the stock and its 100 Trillion shares is “rocketing” to a whopping 2/3’s of its IPO.

    I hope you are not too seep into to it and can get whole – as there are so many folks who averaged their cost basis well below their initial $38 IPO investment with 2 and times as much money to get that average cost to probabably wwhere it is now. And just because short sellers got burned and to cover thewir mistakes – that is not all good news you seem to be overlooking with your rosey glasses :)

  40. Louise says

    @ Paul

    Anyone worth their weight in salt doesn’t use language like that.

    You’re right! Rereading my comments, they sound effusive, like a high from bi-polar. I just got excited, because the negative sentiment seemed like a sure sign that FB is due to rocket!
    @ Brian, FB hasn’t rocketed, yet. You have to concede, FB isn’t looking to tank the way of Zynga and other IPOs, Groupon, etc. I’m not invested. Maybe I’m wrong. The negative sentiment seems like a case study of a stock before it rockets. It hasn’t happened, so far, but FB doesn’t look as bad as before . . .

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