{"id":26363,"date":"2011-07-10T03:22:49","date_gmt":"2011-07-10T02:22:49","guid":{"rendered":"http:\/\/alienbabeltech.com\/main\/?p=26363"},"modified":"2011-07-10T03:23:56","modified_gmt":"2011-07-10T02:23:56","slug":"the-real-world-value-of-the-virtual-world","status":"publish","type":"post","link":"http:\/\/alienbabeltech.com\/main\/the-real-world-value-of-the-virtual-world\/","title":{"rendered":"The Real World Value of the Virtual World"},"content":{"rendered":"
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The following is by G. A . “Andy” Marken, President of Marken Communications<\/span><\/a> Inc. He has kindly given us permission to republish his thought-provoking article. As with everything that we publish at AlienBabelTech, the opinions expressed are solely those of the individual writer and do not necessarily reflect the views and the opinions of the rest of the ABT staff.<\/strong><\/span><\/span> \u2013Mark Poppin,<\/span> ABT Senior Editor<\/span><\/span><\/strong><\/h6>\n<\/blockquote>\n

Virtual Value<\/strong><\/p>\n

\"\"<\/a>After the first social media frenzy you\u2019d think\/hope people learned so things won\u2019t go wrong this time around.\u00a0 If understanding is overpowered by greed, things won\u2019t go wrong\u2026they\u2019ll go seriously awry.\u00a0 Screenshot \u2013 \u201cThe Hangover Part II<\/em>,\u201d Warner Bros (2011)<\/strong><\/p><\/blockquote>\n

A friend recently gave us a flyover of the island he owns out in the middle of the ?????<\/p>\n

Another’s son took us on a tour of his farm complete with cows, chickens, pigs, tractors and a horse out in the middle of ????<\/p>\n

It was fast, simple, easy\u2026they just went to SecondLife, Farmville respectively and showed us around.<\/p>\n

You may think it\u2019s the virtual world, but they paid real money for their property and improvements.<\/p>\n

The new round of online, social media fervor\/fear is as interesting as the stuff we saw in the 1995-2000 dot-com bubble.<\/p>\n

Could it happen again?<\/p>\n

Sure\u2026<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 VCs are hungry to recover their early investments<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Investors are hungry for new technology buzz offerings they don\u2019t understand<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Underwriters, brokers, investors want some upbeat option to our recent recession<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 People with more money than brains are again looking for the fast bucks<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Young kids who put in their time (a whole year, two) want their big home in Portola Valley, Los Altos Hills; their sexy race cars; planes\/boats like Oracle\u2019s Ellison<\/p>\n

There are some good social media companies\u2026there are some great social media companies\u2026there are some cheap copies\u2026there are some duds.<\/p>\n

\"\"<\/a>Every one of them started by guys\/gals sure they\u2019ll be touched by the financial gods.<\/p>\n

All of them feel their enterprise idea is as insanely great as Amazon, Google, Facebook, YouTube, Yandex, Baidu, LinkedIn, Zynga, you name it.<\/p>\n

These firms are the same as, yet different from the last bubble.<\/p>\n

\"\"<\/a>Then, Now \u2013 <\/strong>At the height of the dot-com era, 308 companies went public.\u00a0 The 24 largest had a combined market cap of $70.96 billion.\u00a0 This year, a number of highly visible, prominent firms are on the verge of going public with a valuation of $71.3 billion.\u00a0 The social media IPO frenzy has begun.\u00a0 Source \u2013 Morgan Stanley<\/strong><\/p><\/blockquote>\n

Their value, their worth is in the eye of the beholder.<\/p>\n

Different Rules<\/strong><\/p>\n

They aren\u2019t evaluated by conventional standards that determine the value\/price of firms like GE, Dell, HP, IBM, Microsoft, Disney, Hilton, Chevron, Acer, Asus, Lenovo and the rest of the tangible hardware, software industries.<\/p>\n

The firms above have a fraction of the frenzy going on now:<\/p>\n

\"\"<\/a>Groupon<\/strong><\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2008 \u2013 founded,\u00a0 $4.8M investment<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2009 \u2013 available in 26 cities, $30M investment<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2010 – $135M investment, $1.3B valuation, $760M revenue, turns down Google\u2019s offer – $6B<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 2011 – $950M investment, $4.75B valuation, preparing IPO for $25B +\/-<\/p>\n

–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Status – $760M revenue, $4.75B valuation, 32.8x bubble<\/p>\n

Sources:\u00a0 Yahoo News, TechCrunch, AllThingsD, Fast Co, Forbes, MSNBC, Wealthvest, BusinessInsider, CNet, others<\/p>\n

LinkedIn\u2019s early showing surprised \u2013 frightened \u2013 normally bullish tech analysts.\"\"<\/a>Umbrella Effect \u2013 <\/strong>LinkedIn\u2019s breathtaking initial public offering (IP0) received a substantial boost thanks to the social media rub-off effect of Facebook.\u00a0 Underwriters and thirsty-for-action investors are eagerly waiting for Facebook to go public this year or next.\u00a0 Already though there is a value proposition question on some of the \u201csecondary\u201d firms.\u00a0 Over-the-top valuations and less than seasoned management teams are making many take a second look at the upcoming social media rollouts.\u00a0 Photo – NYSE<\/strong><\/p><\/blockquote>\n

Most of the investors don\u2019t understand the social network but they know it\u2019s hot and it\u2019s here to stay.\u00a0 What it will deliver? \u00a0They\u2019re not too sure.<\/p>\n

If the VCs (venture capitalists) really understood, they would only bet on the winners\u2026not four-five in each category.<\/p>\n

The hot-to-go investors don\u2019t want to miss out on owning their part of the social explosion and if they missed out on LinkedIn there are a few more hot properties sitting in the wings just waiting for them to bid on.<\/p>\n

Then they\u2019ll own their piece of the virtual world that is changing \u2026 everything.<\/p>\n

LinkedIn\u2019s Inner Workings<\/strong><\/p>\n

Because it\u2019s now public you can have a closer, better look at the inside of, value of, potential of social media.<\/p>\n

LinkedIn may be even easier for professional money holders, money managers, money spenders because it is a professional management, marketing, communications community.<\/p>\n

LinkedIn has more than 100 million members with around 25 million U.S. users who visit the site every month.\u00a0 They don\u2019t log in as much as Facebook users; they are active professionals who are more prone to join\/post to professional groups.<\/p>\n

LinkedIn Groups Metrics Worldwide<\/p>\n

\"\"<\/a>Fewer But Better \u2013 <\/strong>While LinkedIn has a much smaller membership base than Facebook, investors see a greater potential with the quality of the members and their global distribution. Source \u2013 LinkedIn Cited byMashable<\/strong><\/p><\/blockquote>\n

As a professionally-oriented networking site it has added value for marketers.\u00a0 These members are more willing to provide more personal information about themselves than the more generic social sites like Facebook.<\/p>\n

That means a more focused HR (human relations) and marketing activity can be carried out with more tangible, measurable results.<\/p>\n

To improve that value LinkedIn spent a lot of time over the past year developing\/launching new services for users and advertisers.<\/p>\n

With businesses of all types becoming borderless, LinkedIn has a major presence in the international arena.<\/p>\n

Eight years after its official launch, LinkedIn reported the size of the site and its usage.<\/p>\n

Global Business<\/strong><\/p>\n

Outside of the U.S. the largest number of members is from India, nine million members.\u00a0 This is followed by Brazil, Canada each with three million members.<\/p>\n

Top 4 Countries, Ranked by Fastest-Growing Number of LinkedIn Users<\/strong><\/p>\n

\"\"<\/a>Real Reach \u2013 <\/strong>Economists find the LinkedIn membership in BRIC (Brazil, Russia, India, China) to be a key asset to the company\u2019s growth potential.\u00a0 In addition, the membership is professional in nature more than social so it represents a strong global business opportunity.\u00a0 Source \u2013 LinkedIn cited by Mashable<\/strong><\/p><\/blockquote>\n

Brazil is experiencing the largest LinkedIn membership of new users with 428 percent year-over-year growth.<\/p>\n

Companies that are focusing on BRIC (Brazil, Russia, India, China) countries for growth see that LinkedIn has a good foothold in these countries<\/p>\n

All of the new social media up-and-comers see global reach as an extremely critical part of their overall survival, growth strategy.<\/p>\n

The social media nameplate companies listed above are earning money but are they worth the valuations people are throwing around?<\/p>\n

The earnings of today have no relationship with reality!<\/p>\n

They may never as long as you\u2026have faith in your parallel universe.<\/p>\n

\"\"<\/a>Noise Ratings \u2013 <\/strong>The rapid run-up of social media valuations and the excitement surrounding the firms\u2019 offerings\/potential offerings leads many to recall the boom\/bust of the dot-com era.\u00a0 It\u2019s the same but different\u2026at least these firms have revenue.<\/p><\/blockquote>\n

Sure, you can measure eyeballs, site visitors, stickiness, mindshare; but do these measurements put money in the cash register at the end of the day?\u00a0 Are they long-term investments?<\/p>\n

What about Zynga?\u00a0 Virtual real estate.\u00a0 Games.\u00a0 They have their feet in both sexy camps so maybe\u2026<\/p>\n

Of course doesn\u2019t that also say Activision Blizzard is worth a bundle?\u00a0 WoW (World of Warcraft) is the world\u2019s most subscribed MMORPG (Massively multiplayer online role-playing game) with folks spending serious money.<\/p>\n

If we look at the last dot-com run-up there are few you can fondly recall \u2013 especially if you were an employee or investor.<\/p>\n

There\u2019s Amazon and ????<\/p>\n

Monetizing<\/strong><\/p>\n

Certainly, social media people like Facebook, Twitter are tracking, analyzing, monetizing their users\/visitors about as well as Google.\u00a0 Just ask Zuch \u2013 Facebook\u2019s Mark Zucherberger – his folks are turning all of that virtual personal information into real dollars\u2026just ask him.<\/p>\n

Are there others that will do it as well?<\/p>\n

As Tracy said, \u201cSeriously what is wrong with you three?\u201d<\/em><\/p>\n

\"\"<\/a>Potential Repeat \u2013 <\/strong>It is obviously possible that those who weren\u2019t around for or have forgotten the dot-com ups and downs will get excited and overindulge just as the financial market did back just before 2000.\u00a0 They\u2019ll wake up with a horrible tattoo,\u00a0 monkey, horrible hangover!\u00a0 Screenshot \u2013 \u201cThe Hangover Part II<\/em>,\u201d Warner Bros (2011)<\/strong><\/p><\/blockquote>\n

The people (users) who buy\/visit the parcels, play the games, post\/exchange information are real.
\nSo is the money that will be invested in the social media IPOs.<\/p>\n

In a few years, the number of social media players will dwindle.\u00a0 The VCs, underwriters will walk away with returns on their investments.<\/p>\n

The rest will have\u2026paper.<\/p>\n

# # #<\/p>\n

by: G.A. “Andy” Marken<\/strong><\/p>\n

President<\/strong><\/p>\n

Marken Communications Inc.<\/strong><\/p>\n

Andy@markencom.com<\/a><\/strong><\/p>\n

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