Counterparties: There is a tech bubble that will never go out
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Nothing amplifies like the Internet. Witness the latest arguments over whether we’re in another tech bubble that have set off an echo chamber of self-interest, defensiveness and conjecture.
Last week, NYT tech reporter Nick Bilton slammed the “no revenue” formula for startup success. (Instagram, you’ll recall, made no money and was sold to Facebook for $1 billion last month.) In its “Human’s Guide To The Tech Bubble,” Buzzfeed attempted to explain why we’re in a bubble:
Because companies that make no money are being given lots of money for reasons that make no sense to normal people. This is not inherently bad or wrong – there are ways a company can be valuable in the long term beyond making money right now – but when this happens a lot and very suddenly, it means there’s a bubble. When Evernote gets valued at a billion dollars, it’s a bubble. When failed startups get picked up for tens of millions of dollars, it’s a bubble. Basically, when strange and inexplicable things start happening every day, it’s a bubble.
Tech investors, predictably, weren’t happy with Bilton’s piece. Marc Andreessen suggested revenue doesn’t matter to a big company acquiring a startup. Ubiquitous angel investor Ron Conway also denied there’s a bubble, adding, somewhat unbelievably, “the companies getting funded have sales and profits”. Paul Graham argued that high prices do not a bubble make. And Chris Dixon thinks it’s complicated – public tech companies are not overvalued, he wrote, but he admits that seed-stage valuations seem frothy.
Dave Winer suggests that the bubble talk largely applies to young companies hoping someday to make money from advertising. And Peter Kafka has found yet another unproven startup raising millions of dollars in seed funding. That one, too, is ad-based, which is interesting given that Facebook is showing signs of struggling to sell ads.
Whether you call it a bubble or not, remember this: There’s any number of well-funded startups chasing a market that’s set to explode. Some may even make real money. Total spending for online video ads is expected to triple in the next four years, mobile ad revenue may quintuple. – Ryan McCarthy
On to today’s links.
Bank CEOs have rare face-to-face meeting with governor of NY Fed – American Banker
Fed’s Tarullo Backs SEC Plan On Money Market Funds – WSJ
An endorsement of nominal GDP level targeting could lead to a big shift at the Fed – The Atlantic
A sensible alternative to European austerity (that could actually work) – Vox
A key euro zone manufacturing index just hit a 34-month low – FT
Hugh Hendry is afraid Europe will seize his clients’ valuable assets – Business Insider