Do Big-Money Acquisitions Mean We're In a Tech Bubble? 266
Nerval's Lobster writes "When a major IT company pays a reported $30 million—roughly 90 percent of it in cash—for an iOS app with no monetization strategy and a million downloads since launch, is that a sign that the tech industry as a whole is riding a massive, overinflated bubble? Yahoo isn't alone, by a long shot: over the past couple years, a few apps have been snatched up for enormous sums—think Facebook's $1 billion acquisition of Instagram in 2012, or Google buying Sparrow for a reported $25 million. Nor has the money train stopped there: in a pattern that recalls the late-90s market frothiness for anyone over the age of 28, a handful of tech companies have either launched much-hyped IPOs or witnessed their share price skyrocket into the stratosphere. But does all this IPO activity and app-acquiring actually mean 'bubble'?"
Yes (Score:3, Interesting)
I live in the San Francisco bay area and the general vibe in this area is very reminiscent of how it was during the dot-com bubble of the late 90s. Lots of easy money is being thrown around, there's a housing shortage and rents are sky high, and my phone is ringing off the hook with requests for job interviews and I'm not even on job boards anymore.
Re:Bubble (Score:5, Interesting)
Re: Well, duh. (Score:3, Interesting)
It is new world bribery and payouts (Score:4, Interesting)
Re:yay for bubbles (Score:4, Interesting)
The 90s dotcom bubble was run by nerds, with tons of big ideas for what the Internet should be, but little business sense, and even less long-term work ethic. They were given boat-loads of cash, with little to no strategy for long-term success. The really good ideas stuck around (see Google, Amazon, eBay) while most fell by the wayside.
The current bubble seems more like an intentional inflation, trying to catch the same lightning-in-a-bottle. Except this time it's being run by more business minds, less nerds. People who were perhaps old enough in the late 80s to grasp Gordon Gecko's "Greed is good" mantra, but not old enough in the 90s to catch the dotcom wave. They want to recreate that magic and just pocket all the free money. Thus your observation that the "heartwood has given out." There are no eBays or Amazons this generation, just faux-photo filters and Pissed-off Poultry.
Re:30 million dollar purchase? (Score:4, Interesting)
I gather the way it works in Multinational Corporation Land is that the holding company with the cash is a "subsidiary" that is a PO Box in Ireland that buys a $100,000,000 asset from the USA-based parent company for $30,000,000. The USA-based company then buys the app for $30,000,000 from a third party, sells it to the subsidiary for $1 and claims a $69,999,999 loss to the IRS. The subsidiary then licenses the app back to the parent company for 110% of the revenue generated by the app in a package deal that includes transferring the $100,000,000 asset back to the USA-based company (companies can be tough negotiators with themselves). All the profits are booked in Ireland and the losses in the US and the headline is "USA-Based Company Buys $30,000,000 App." Then again, maybe I just don't understand all this complex business stuff, which is why senior executives make 400X my salary.