Astounding. That’s the only word that came to mind after I read the assigned readings for Industry & Economics. Well that word plus a couple of phrases, one of which was “Are people really that ignorant?” Now, before you start thinking that I am wrong with that question, I want to say that when things seem too good to be true, they are. Stock investments rarely make people rich that aren’t wealthy already and the survey that you just took that was three questions total that offered you a $500 Visa gift card or a 16gb iPad 2, is just not legit. With that in mind, a website that does not actually sell a tangible object, or anything for that matter, is quite possibly not worth 576% more than its implied “revenue”.
Just like any industry in our country, being profitable is always the ultimate goal. Now that we are entering into the Web 2.0 economics of the e-commerce industry, we need to all realize that offering services to people can be profitable depending on the service and even companies that take a percentage of sales directed from a website can be as well. The only question then is, how profitable?
Well that question has a variety of answers and some of the answers may not truly hold merit. The only answer to be entirely trustworthy in my mind is; we don’t know. Even though we saw that Amazon and Google survived the Dot-com Bubble of the 90’s, and these companies are “worth” billions, that is highly unlikely for other websites to rise to that astronomical level. In the end where does all of this implied wealth come from? And who does it really benefit?
The company or person or people, wanting to attain the company?
Essentially, the “value” is nothing more than words on a screen or text on a piece of paper. The same reasons that were responsible for the Dot-com Bubble were also responsible for Wall Street crashing. As we give something value, or really an estimation of what the company is “worth”, we cause a stir in the minds of a lot of individuals. Especially if that estimation is inflated to the point that everyone thinks, “it would be incredible stupid of us to NOT buy stock in that online venture.” In my personal opinion, generally that “stirring of excitement for the next upcoming billion dollar company” starts in people who are money-oriented and power hungry. That confuses me. Is it the desire for wealth and power that drives people to over-value the company, and therefore the stock for that company? I know that we all want to be a part of “the next big thing”, so why is it that the ones that abuse these situations to make a few rich and a lot of people lose their life savings can really influence someone, even an entire industry? I personally feel that over-valuing a company benefits few and hurts many.
Web 2.0 is in a delicate state right now with all of the social media sites popping up everywhere and people placing unrealistically high estimations on their value when they do not actually make profits. The biggest example of this to me is Pinterest. As we discussed in class on Monday, Pinterest is “valued” at an estimated $7.7 billion when there revenue and profits are both a big fat 0. I believe that these companies that have astounding numbers of members and web traffic could in fact be worth that much money IF they had revenues of some sort, but they don’t. And that’s the bottom line, isn’t it?