This summer is turning into a love fest so far for Internet stocks.
Maybe it’s the blockbuster movies or the digital generation sighing a
collective “duh?” as the world revolves more and more around being
connected.
Between the Hangover 2, Transformers, Green Hornet and Thor it’s been a
super hero summer (I’m counting the monkey in Hangover 2 as the super
one). Ditto for Internet.
First we has Yandex go public. If you haven’t heard of them it’s natural
because they’re a Russian-based Internet company. Some say Yandex is the
‘Google’ of Russia. (Don’t confuse them with Spandex).
Then there was Pandora, the popular iPhone music service. It had a nice
debut, rose above offering price, dipped below and then crept back up.
To me the uncertainty with Pandora is what impact popular European-based
music leader Spotify will have when (if) it debuts in the U.S. Rumors
have a Spotify-Facebook teamup possible. Not surprising since Marc
Andreessen is on Facebook’s board and a big Spotify fan.
LinkedIn also went public. The resume and co-worker comment network
popped out the gate and has continued the climb. The major risk I see is
that Facebook app maker Branchout (which lets you share your resume on
Facebook) seems to be picking up steam. LinkedIn’s best move would be to
acquire Branchout and seal the market. Remember what happened to MySpace
when it let Facebook run? Or Friendster when MySpace ran? Acquire and
add the rocket fuel to your effort.
Deal slasher Groupon also filed to go public, as did Zynga, the
Facebook-heavy social gamer…in no time I expect to see Facebook file
its own offering.
Have we seen this movie before?
In 1994 when I first got into the Internet “industry” my belief was that
this new commercialized medium would become ubiquitous. In 1999 when I
was in China and Europe looking at movement in the Internet there was
little. China had nobody online then and today has over 400 million.
Nowadays in many ways the early vision and promise is being fulfilled as
the world depends on the Internet for global commerce and
communications. Whether it’s on a PC, tablet, device or mobile phone the
inter-connectedness is 24/7/365.
Like Google’s IPO several years ago many thought it was priced high. And
then the revenue skyrocketed and the valuation came inline quickly with
strong cash flow and earnings.
In 1997 a few people thought Amazon was overvalued at its IPO…back
then I recommended it at a split-adjusted $1.50 per share, calling it
the “Walmart of the Web” when it only sold books. Amazon stock is $218
now. In fact, I still think Amazon has a ways to go.
Which brings about the question: are the valuations of these
newly-public firms out of whack? For some I would say “yes” and others I
would say “no”.
The underlying driver of value to me is beyond just saving people time
and money…it’s bringing them information or entertainment that makes their
time and money more enjoyable. More fun. More worthwhile.
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