Down on Google day -- part 2

Wired has a long article on the birth of google+. Read it if you dare.

What struck me was the complete lack of strategy behind Google's entry into the social space. There's a certain kind of executive, whom you run into a lot at the certain level, who has very crude reasoning for what he does. It's all very ENTJ run amok. I'm sure there are slides floating around the Googleplex that shows Facebook is now competing with the internet for user time. But I'm wondering if this is really important. It's like the portal strategy Yahoo! & company were running in the late 90s to make eyeballs more "sticky". Then Google comes along and shows that it's not about sticky eyeballs -- it's about creating customer value and them capturing it.

Here we are 10 years later, and now Google is worried about how sticky the eyeballs are. Sad.

Tech bubble?

You can read through the Horowitz/Blank tech bubble debate on the Economist website and make up your own mind, but I think it's interesting how neither characterizes how this particular bubble is interesting and different.

I think that Blank's model about how bubbles inflate or deflate is fine, but not particularly pertinent to whether we are in a bubble now. Horowitz, by talking about public valuations (and referring to Google, Yahoo! etc. in particular) misses the point entirely.

The bubble, if there is one, is entirely private, and the valuations, if they are generous, as VC valuations, not public market valuations. If young startups are getting funded at valuations that require exits at dramatically higher levels than they historically have, then it's a bubble. And this is almost certainly happening now as VC funds left over from the last boom seek something, anything to invest in hoping they will get the next Facebook. Wealth angels who cashed out in web 1.0 or web 1.5 are also pushing up early valuations.

I don't know if the bubble will spill over to public markets or if it will cause silent destruction amongst VCs and institutional investors. The well known private companies with strong earnings (Facebook, Zynga) will probably do fine, but I don't know how Foursquare, no longer hip, will ever justify its $500M valuation. Even twitter will lose its luster if it stops growing (which I believe it has). People think Groupon sucks and it isn't even public yet.

After these guys the bench lacks glamour, and both Pandora and LinkedIn aren't anything like the Netscape boom that started the party in 1997.

The defining characteristics of bubbles is that some chump is left holding the bag at the end. In this bubble, the chumps are VCs unless they can trigger a big stock market boom.

Has the internet bubble popped already?

Pandora IPO'd at $20, opened at $25, and then slid down to $17.42.

This should be celebrated as a triumph, as Pandora raised the correct amount of cash from its offering (as opposed to LinkedIn, who left a bunch of money on the table).

That said, this may deflate the bubble which is strong in private markets, but needs greater fools in the public market to keep on going. I've met Tim, and I hope he's not too bummed about what happened today.