We are witnessing a fascinating changing-of-the-guard moment in tech. The old Internet, represented this week by once-mighty Yahoo, is fumbling with another leadership crisis it must solve before it can even think about restoring some semblance of relevance. The new Internet, Facebook, is ruled by a young man in a hoodie who is on the verge of creating a massive public company that, as was the nascent Yahoo back in the early ’90s, will be an Internet darling longer on potential than track record, but running hard on an open field.
The common thread might seem to be the “If it’s big, it’s gotta be BIG” illusion that got us all in trouble at the turn of the millennium, when Internet investment hysteria equated today’s eyeballs with tomorrow’s profits. But it’s always about the profits, and the people who promise them. This time that person is Mark Zuckerberg, who as the books on the Facebook IPO closed Tuesday, well in advance of Friday’s first trade, seems to have convinced Wall Street that his seven-year-old company could be worth more than $100 billion — the richest-ever launch in Silicon Valley.
When you value your company at 100 times revenues, investors are banking on the belief that Zuckerberg has perfected the unstable compound that is social abandon and advertiser hunger.
Search remains pretty much the top use of the Web (as opposed to the Internet) – the gateway to everything else. The other big use is now social, which was invented on the Web but whose chops will be tested in the app schoolyard that is the mobile Internet.
But thus far, advertising works better on search than social. Google makes about $40 billion a year, almost 100 percent on ads. Facebook is reporting last year’s revenues at just north of $1 billion $3.7 billion. Google has a market cap of roughly $200 billion – so it’s twice as big as Facebook’s IPO valution and makes 40 times the money more than 10 times the money.