Category: facebook

Tech bubble v2.0

Posted on by Steve Sammartino

I recently blogged about the unrealistic valuation of Facebook, seems there’s many who agree with startupblog. Sure web 2.0 is heating up, but as usual they’ll be stayers and those who disappear. The only thing that changes…. This is a really clever and fun parady.

[youtube=http://www.youtube.com/watch?v=KtdV3z9eCm8]

If we want to be here in the long run here’s some simple advice:

Offer a service people need, ensure it has a built in way to make you money, not an exit plan which sells eyeballs – these only work for a few ‘wordbeaters’ (like facebook & youtube).

Facebook Apps vs Advertising

Posted on by Steve Sammartino

There’s no shortage of both of these now, although we’d like to know why anyone would invest money in advertising on facebook, when one can more cheaply create an application?

 

There’s no shortage of useless apps out there…. No I don’t want to be a vampire, but I do want to:

If I’m interested and the app is good, it will find me. If there is an advertisement in a side bar, I’m generally going to ignore it. I’m not on facebook to look at advertisements, no matter how targeted.

At Rentoid.com today we launched “Where did my money go?” An app which  

–          helps calculate the value of idle assets

–          gives cools icon gifts to share

–          shows people how to unlock their idle asset value

–          enables users compare the value of their stuff

  facebook-where-did-my-money-go.png

All while being part of the reason people are on facebook. We did this with just a little bit of coding. Check it out here.

 

Good app’s which are fun, useful and have a reason to link back to your business are an absolute boon. We can always improve an app over time by paying attention to user feedback. We’ve been gifted to have a free open platform with 52 million members. Instead of advertising on facebook and being an ancillary, build an app and be part of the ball game!

 

Business valuations & Facebook

Posted on by Steve Sammartino

The recent deal where Microsoft took a 1.6% stake in Facebook for $US240 Million valued the company at $US15 Billion.

 

Here’s some numbers:

  • Facebook has a revenue of approx $100m per annum. 

  • Although profit is currently undisclosed, even a generous 50% profit on sales margin would result in a diminutive profit of $50 million.

  • This would result in a PE ratio of 300 times!

  • Which means, it will take Microsoft 300 years to pay back their investment.

Start up blog view: This could be the most ridiculous sale price anyone has ever paid for a company.

Has everyone forgotten about these start up web 1.0 heroes of the late 1990’s and early 2000’s:

kozmo.com

Global crossing

Worldcom

govWorks.com

eToys

Boo.com

Pets.com

theGlobe.com

Where Investment banks and reputable companies such as Microsoft paid exorbitant  prices for many now non-existent companies with zillions of page views, sessions and ‘potential’?

It’s different this time, right?

At some point in our journey we all have to value a business. So we must remember the following:

When selling: Potential, emotion and short memories can get you a great price

When buying: Forget ‘potential’ and focus on ‘current’ earnings and investment payback period.

Bonus conspiracy theory: Microsoft really bought the personal information of the 42 million active Facebook members.

The truth about social networking

Posted on by Steve Sammartino

 

The old fashion methods of social networking have always been and will always be, the best way for making connections.

 

Sure, I’ve got a facebook and linkedin page. But the reality is this:

 

Unless we have a persons phone number in our cell,

their email in our address book,

we would say ‘hello’ if we passed them on the street,

or we could comfortably have coffee and chat,

they are not a ‘real’ contact.

 

This is not to say that we should limit ourselves to who we already know, but to nurture our current ‘real’ relationships, which will lead to more ‘real’ relationships. Repeat.

Facebook et al are a great way to ‘re-find’ people, but can we imagine going to meet someone we’ve not been introduced to the old way and have a valuable business meeting with them? Can we imagine meeting with a random social network inviter and becoming close business or personal associates?

I’ve said it before and I’ll say it again: Old in the new New.

The Intelligent Entrepreneur

Posted on by Steve Sammartino

“The Intelligent Investor by  Benjamin Graham is by far the greatest book on investing ever written”….

 

Qualification of this statement is clear when Warren Buffet the worlds greatest investor and second richest man was the orator of the quote.

 

Here’s why it could also be titled The Intelligent Entrepreneur.

We cannot be great entrepreneurs unless we understand fundamental finance and investing principals.  

This book holds all the keys to money and investing. Principals entrepreneurs ought know to play the money game. Simple principals which again and again prove true at the culmination of each investing bubble. The 1999 Dotcom boom & bust the most recent example. Make sure you get the version with the updated commentary by Jason Zweig pictured below. It provides modern day examples of the principals.

 theintelligentinvestor.jpg 

Heads up to Mr Facebook, Mark Zuckerberg. Advice from the intelligent investor would be for the owner to sell, and any buyers to reconsider. To have a business which justifies the billion dollar valuation would require approximately $100m a year in net profits. I’d guess Facebook is quite a way off when its turnover is currently $100m.

 

Warning: This book is an arduous read. With over 500 pages to wade through it takes its toll. But the lessons there in you’ll hold for a business and financial life time.