[bub-ble, (buhb-uhl), noun, ... a globule of air or gas contained in a solid; anything that lacks firmness, substance, or permanence; an illusion or delusion]
How in the name of all that is logical and sensible on God’s semi-green earth, can a start-up company fail to earn even one U.S. dollar and be valued at over $1 Billion? According to the September 25 New York Times, Twitter is about to raise $100 million, based on a market cap valuation of $1 Billion.
Domino’s Pizza, by comparison, had sales of $1.4 Billion and has over 10,000 employees, and is valued at only half that amount.
Twitter, to my knowledge, has not posted any sales from advertising revenue, and is yet to be proven as a financial business model. Besides documenting over 60 million unique visitors globally to its site in August 2009, the company has yet to demonstrate that it can achieve a sustainable level of operations. With about 60 employees, the company had raised about $50 million to date and had generated a tremendous amount of PR and word of mouth brand building. The celebrity appeal was rumored to be a sponsored arrangement between Twitter and the personalities they contracted, like Ashton Kutcher or Shaquille O’Neil, who sold the right to use their name in association with Twitter, using ghostwriters to post fictitious daily muses.
And Wall Street questions the value or equity of traditional, established media companies like Hearst, Time Inc., and Condé Nast? This is crazy.
A few well known venture capital firms and T. Rowe Price, a mutual fund company, are placing a bet that companies like Twitter represent a new model, a shift in the business paradigm that is the internet. Sound familiar? Didn’t we go through this all once before with the colossal failure of well capitalized companies like Webvan in the late 1990′s? Those companies did not prove their value, and yet an incredible, illogical amount of investment dollars poured into the venture. But now, along with a snappy new name (Web 2.0), we’re supposed to take the bait again and jump at the chance to buy stock in the bright, novel, new web companies. And newspapers like The New York Times will only add to the furor with constant reportage.
Considering this investment model, maybe I should do a public offering with Iridium. I mean, we’ve been in business successfully — more or less — for over 15 years. We also have a website. And in my humble opinion, the recovery has finally found some traction, meaning that we have survived our second global recession during that time. When I do the math, the shareholder (that’s me) return on investment turns out to be something like 1,000,000 times the original market value (the cost of the first Apple computer I bought).
With a little pizazz, some young looking garb, and “smoke and mirrors” language added to my presentation, maybe I could even create the same kind of wide-eyed, buzz perception that we’re working in a brand new business world. You know. . . a different market, or model for generating value — a new, different, better way to perform, to create those inevitable, impending bundles of cash.
New and different. Better. That has, after all, been the reasoning used by every huckster peddling their wares, or common swindler selling snake oil cures since the beginning of time.
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