Are we in the middle of a tech bubble?
TEXT OF STORY
Kai Ryssdal: We told the other day about Google maybe buying the email coupon service Groupon for as much as $6 billion. Groupon’s two years old — two years old. Worth $6 billion.
Think about that for a second, and some of the other new e-companies out there that are being valued in the billion dollar range, then repeat after me: dot-com bubble, anybody?
Marketplace’s Steve Henn reports.
Steve Henn: Sucharita Mulpuru thinks Google is nuts. She’s a retail analyst at Forrester Research. In a blog post, she said paying $6 billion for Groupon is absurd, writing the company is younger than her toddler and that pretty much anyone can copy its business model. But:
Sucharita Mulpuru: There are a whole lot of Internet entrepreneurs now probably doing dances because this just created another kind of comp. So much of valuations are based on comparables and now there is just this out-of-the-world comparable that just brings back memories of 1999. And we didn’t think we’d ever see a bubble like this again. But we spoke too soon.
Still, she says, this bubble is different. In the late ’90s, the bubble was driven by stock market speculation and greed. This bubble, she says, is inflated with fear.
Mulpuru: The fear is in a worst-case scenario, a competitor takes this business and then that results in our losing market share.
Firms like Google worry that another Facebook will come along and eat their lunch.
Saikat Chaudhuri, a mergers expert at the Wharton School of Business, says Google, Microsoft and Apple are also sitting on hordes of cash.
Saikat Chaudhuri: Certain companies are in better financial positions. Now that doesn’t mean they should squander their cash. But…
If you think a start up could hurt you, why not just buy it? It may just turn out to be the next big thing. After all, even though Groupon’s just a toddler, it’s worth remembering Google is only a pre-teen.
In Silicon Valley, I’m Steve Henn for Marketplace.
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