aster wrote:BillyB wrote:I heard one commentator refer to facebook shares as 'muppet bait' - I'd concur with that.
Wasn't Groupon the prime (and most evident) example of this? Even here we discussed how that one was going to tank...
Disclaimer: I'm not a market wiz, but I worked in Silicon Valley through my 20s and know plenty of people in many of these 'hot' startups.
IMO, the problem with Groupon is/was that it's model doesn't scale effectively. The most expensive cost in most of these companies is human capital. Finding effective employees, and then paying them. A company like Facebook, or even Zynga, should be able to effectively scale their model to handle more demand without a proportional increase in employee headcount. You spin up new servers, deploy things in parallel, bla bla. All things being equal, a good operations team can just as effectively handle 10,000 or 100,000 instances in a well designed infrastructure.
Now with Groupon, their model is based on CSRs and Sales People dealing directly with Mom and Pops and SMBs the world over, selling them on the service, then effectively marketing and selling it to customers all over in a manner that will turn a profit. So to scale, you need good employees in each of these local markets. Hiring someone good is always a challenge as you can only glean so much from interviews. Hiring someone good, remotely, for a market you're not even 100% knowledgable on, is a huge challenge. The alternative is to just buy out local companies doing similar things and try to merge them. I'm not an expect on that either, but I sure as hell imagine there is a finite number of acquisitions you can effectively merge under one roof and make profitable over a set period of time. And I suspect Groupon's effective finite number is much smaller than what their shareholders will want.
Now, for something parallel to Facebook, I would personally look at LinkedIn or Zynga. Zynga is good because they both have such a parasitic relationship with each other. I'd suspect you'll see their stocks swinging pretty closely together with each other.