Tuesday, 24 April 2012

Social Media. Jump in, cash in.

A little while ago I blogged as to whether we were seeing the signs of a bubble, similar to the one which pre-dated the 2000 crash 

A couple of reasons prompted me to ponder that.

Firstly I was there in March of 2000 with an IPO for an ISP and it just "felt" the same. It had the same "feeling". Hardly science but if it looks like a duck, walks like a duck.....and I'm not the only one feeling that.

Secondly of course, Facebook had just acquired Instagram for a billion which seemed (and seems) to be twice Instagram's own excessive valuation a week previously. And it's a lot of cash even for something as cool as Instagram.

Thirdly, and perhaps most importantly, the Instagram acquisition came from a sucession of quick acquisitions of companies with low revenues, low staff and light track records. This to me marks out a bubble. A high level of investment interest in something that's not sparkling now but which will. Something that has belief.

By quick, I mean that only days before, Mashable, which is a blog (yes, I know it's a really good blog) but a blog nonetheless, had just sold to CNN for 200m usd. Around the same time, Draw Something, an App only weeks old had just sold to Zynga for circa 200m usd. Then most recently, Apple had achieved a valuation (market cap) of 600 billion usd. And so on.

At the same time I was noting on forums for venture Capitalists/Investors that war chests were being built. Money was being raised.

Big news then today from the UK that "Vodafone, one of Europe’s biggest mobile operators, has made a formal offer to buy up the assets of Cable & Wireless Worldwide for £1 billion ($1.7 billion), a deal that catapults Vodafone into running its own fixed line network in the UK and specifically will give it a much bigger view to winning enterprise business — a big challenge to BT and a mark of further consolidation in the space" (Techcrunch). This brings Vodafone over 10 billion usd in revenue and it's an 'agreed' bid.

Another 1.7billion usd deal.
Add to that data based start-up Locu, has raised 4m usd; Moat, an adtech start-up raised 12m usd; Answers.com, who raised 127m usd last year, announced a "significant minority stake"; Tango, a video chat service (not unlike Skype), closed a road of 40m usd in funding.
And that's just this week.
Finally just if you remain unconvinced, we are even starting to see the bragging rights of investors.....Andreesen Horowitz proudly revealing that it made $78 million off its $250,000 seed investment in Instagram’s billion-dollar acquisition (which is pretty unpalatable actually in a recession reeling world).

If this is a bubble, it's one great big opportunity.

It will bring higher valuations and potentially competitive exits. More money for Social Media investment, more money for marketing, more money to engage.

If ever there was a time to get online, develop Social Media ideas, bring new thinking to the Web, it's now.

There's money out there and more of it coming.