Golden Age of Silicon Valley Is Over With Facebook IPO

Hugh Pickens writes "Steve Blank, a professor at Berkeley and Stanford and serial entrepreneur from Silicon Valley, says that the the Facebook IPO is the beginning of the end for Silicon Valley as we know it. "Silicon Valley historically would invest in science, and technology, and, you know, actual silicon," says Blank. "If you were a good venture capitalist you could make $100 million." But there's a new pattern emerging created by two big ideas that will lead to the demise of Silicon Valley as we know it. The first is putting computer devices, mobile and tablet especially, in the hands of billions of people and the second is that we are moving all the social needs that we used to do face-to-face onto the computer and this trend has just begun. "If you think Facebook is the end, ask MySpace. Art, entertainment, everything you can imagine in life is moving to computers. Companies like Facebook for the first time can get total markets approaching the entire population." That's great for Facebook but it means Silicon Valley is screwed as a place for investing in advanced science. "If I have a choice of investing in a blockbuster cancer drug that will pay me nothing for ten years, at best, whereas social media will go big in two years, what do you think I'm going to pick?" concludes Blank. "The headline for me here is that Facebook's success has the unintended consequence of leading to the demise of Silicon Valley as a place where investors take big risks on advanced science and tech that helps the world. The golden age of Silicon valley is over and we're dancing on its grave.""

Actual buyback

[Kupfernigk]

Sorry for double post. I just noticed the exact figures in the Telegraph:

Share price implausible [telegraph.co.uk]. The tl;dr is that of $16 billion, nearly $12 billion had to be bought by the usual suspect banks: Morgan Stanley, JP Morgan and Goldman Sachs. Among all the hype, that is actually a huge failure.

Re:Facebook

[timeOday]

Your ignorance boggles the mind:

Now teaching Entrepreneurship at three major Universities and the National Science Foundation Innovation Corps (I-Corps), Blank co-founded his first of eight startups after several years repairing fighter plane electronics in Thailand during the Vietnam War, followed by several years of defense electronics work for U.S. intelligence agencies in "undisclosed locations...."

Subsequent to dropping out of the University of Michigan, Steve Blank arrived in Silicon Valley in 1978, as boom times began. His early startups include two semiconductor companies, Zilog and MIPS Computers (now MIPS Technologies); Convergent Technologies; a consulting stint for Pixar; a supercomputer firm, Ardent Computer; peripheral supplier, SuperMac Technologies; a military intelligence systems supplier, ESL; Rocket Science Games.[3] Steve co-founded startup number eight, E.piphany, in his living room in 1996. After retiring from E.piphany the day before its IPO in September 1999, Blank served on two public boards (Macrovision and Immersion) and several private companies. He continues to selectively invest and advise Silicon Valley startups such as Votizen.

Would it kill you to do a quick check on wikipedia before expounding away?

Facebook stock is going to tank

[Animats]

Facebook stock is going to tank.

They opened with a price/earnings ratio of 92. (Closed around 88, as the stock price dropped from 42 to 38). A normal P/E ratio for a successful large company is between 10 and 20. (Google is at 18, Microsoft at 10, IBM at 15, Apple 13, News Corp. 16).

What this means is that Facebook has to increase their revenue by a factor of 6. They can't increase their user base by that much; there aren't enough people on the planet.. Their Alexa traffic peaked in mid-2011, so they're no longer growing. Their revenue per ad is dropping. General Motors just dumped Facebook as an ad medium because it was ineffective. Facebook has lately been increasing the page space devoted to ads. Myspace tried that before they tanked.

We've probably seen the peak of ad-supported businesses. There's only so much ad spending in the world to compete for. That industry is not the future. It's the past. Like the "house prices can only go up" crowd.

It's important to look at key ratios, like P/E and median house price / median income. Those tend to stay in a narrow range over decades, and when they get too high, it's a bubble.

We warned you. You didn't listen. Now suffer. Downside [downside.com]