Tech Bubble or nah…?

Let’s begin with key quotes from this worthwhile read: Why the global tech startups bubble isn’t likely to burst

“…Likewise, the technological building blocks for digital firms have now become so evolved, cheap, and ubiquitous that they can be easily combined and recombined.”

Those building blocks are many, and the most important of them are “platforms”: hosting services (the cloud), distribution services (app stores) and marketing venues (social media). The ultimate platform, they argue, is the Internet, which has become “fast, universal, and wireless.”

Startups can be thought of as “experiments on top of such platforms,” and they are doing, according to the report, what humans have always done: “apply known techniques to new problems.”

I have in the past argued (mostly) that “this time it’s different” since tech valuations are not really that high given the massively increased user bases we are talking about, both as to the overall Web, and Mobile in particular. See here:

There also were moments when I started to have my doubts, and there certainly are excesses and plenty of “froth”:

But ultimately they are just not in the “irrational” territory, galling though they may be at times (ask the average San Franciscan about Twitter, Google, et al. making their city ever more unaffordable… asf.).

Here is a thought I just developed over on an old thread I was rereading: (see for the per sector employment stats/trends data background)

Re: “Information Services” / Software employment remaining steady, that is one of the reasons for startup / Silicon Valley perceived bubble valuations:

1) If the input of s/w engineers stays about constant, but they are serving ever larger user populations with roughly those same numbers, then the price of the company/startup (= group of engineers) must by Supply/Demand “law” go up. Compare 50 odd employees of WhatsApp serving 450M active users!

2) “Mobile” (phones mostly) has created a 10x jump in addressable users (even for relatively new companies) that was previously unheard of, while the #dinomedia and similar “dinosaur” businesses are having to contend with ever stagnant or even shrinking “user”/customer pools.

E.g. think about “Old Hollywood” and why it is increasingly in trouble world-wide: If a semi-hit movie brings in $100M in U.S. box-office, that means that given the current price for a ticket trending toward an average of $10, that’s really only 10M people that have seen it! (Yes, there is the Redbox/Netflix/TV distribution aftermarket, but that’s “Aftermarket dimes for Box Office dollars”. Fine. Add another 10M say, but realize that the prices for this are increasingly trending to $1 – Redbox, or less – bundled subscription content a la HBO.)

TV similarly is looking at normal “users” (viewership) in the 5M to 20M range even for its top shows BTW. Yet no one had/has ever accused Hollywood or TV of being in a (valuation) “bubble”. Maybe in decline, but not a Bubble.

Now compare that to Instagram, WhatsApp, Facebook, Twitter, etc.”addressable users bases”!

3) In summation, Mobile truly has changed the game. Ecosystem (size) is everything…

Compare the specific case of “digital news businesses” as a recent growth in VC funding phenomenon

…For the longest time, the founder, Shane Smith, talked about Vice becoming the next CNN, which sounded outrageous. Now that it is valued at five times what The Washington Post recently sold for, it doesn’t seem quite so silly.

Big (Old) News(paper) Media caught in the same trap of their comparatively minuscule addressable user bases:
(no, neither the WSJ or the NYT are far behind, in an “Orders of Magnitude” sense…)

Yes, they each have a “digital” leg to lean on, but they largely insist on trying to veil those behind “Paywalls”/-fences. Which brings me back to the oldie but goodie pronouncement I made here:

“…Only then will some in the #Dinomedia come to see, that the race was not about who was still going to eek out some residual ‘crumbs’ profits from the Old System, but who was going to wholesale import the masses into their Ecosystem.”

All the way back to the original linked posts “platform” angle: Yes, the platforms are massively more evolved than they were in say 1999. Just think on Amazon’s AWS Cloud Infrastructure service and from there on down (Google, Facebooks “OpenCompute”, etc. etc.).

The one area where all of this wonderous infrastructure is underdeveloped and deeply insecure is in boring basics such as passwords (they STILL don’t work…), security, encryption (as we’re learning weekly from Greenwald/Snowden), and that most basic Internet protocol of all, E-mail (up to 90% spam load last I heard…).

Those are the areas where the entire Internet could still trip and fall…