How the bubble might burst on Groupon!

For those of you whom have been following recent news, the emergence of large social media IPO's have not been uncommon. Since Goldman's valuation of Facebook was estimated at $50 billion, many tech companies have been clamoring to push IPO's to capitalize on the "Facebook" effect. The "Facebook" effect as I like to call it, is a the positive influence of a high valuation to relatively lower valuations. The fact that Facebook received such a high (or over) valuation has allowed other companies to use market sentiment to demand higher valuations. Cue Groupon. Groupon initially valued at $4.8 billion scoffed at the initial estimate and argued that they were worth more. We all thought they were crazy. Now it turns out we may be the crazy ones, recent reports indicate that Groupon may now valued at nearly $25 billion. Not too shabby for a coupon company. The question now is Groupon actually worth that much? The answer sadly is, Groupon is is worth what the market is willing to pay for it.

This remarkable quintuple of value over a six month span indicates something troubling developing in the technology, specifically, the e-marketing industry. A technology bubble is developing. If history has taught us anything, it is that what goes up must come down. Period. This was lesson that was learned the hard way in late 1990's (dot com crash) and again in 2007 (housing market). If this is the case today, then Groupon's valuation is symptom of the illness. Overconfidence and greed coupled with investments in the social media industry may spell disaster for social media companies in the future. In the meantime lets hope Groupon won't burst the bubble.

Can Myspace market itself back to success?

At the end of the technology bubble of the early 2000s, Myspace emerged as one of the largest, fastest growing Internet companies easily with over 100 million members. That was until Facebook took Myspace’s market share among the fastest growing user segment (young adults) and left it to rot. Now several years later, Facebook is on the cusp of ruling the social networking world, while Myspace is still trying to find a way to reinvent itself. According to Forbes.com, Facebook just topped Myspace and Linkedin as the most” Loyal” social networking site. So is it any surprise that Myspace’s new positioning strategy incorporates positioning the site as a “complimentary offering to Facebook and other social platforms”? The answer is NO. It seems as Myspace has devised a new corporate motto, if you can’t beat them, then join them.

Myspace is hoping the integration of their platform with that of Facebook, Twitter, and Flicker will help Myspace in “becoming the leading social entertainment destination”. In the past, Myspace has been seen as place for music and young teens to connect with pop culture. Myspace hopes to build on that format by allowing members to Facebook to “like” its programs and also to coordinate “tweets” with your music sharing. So far the “Sync with Facebook” has resulted in an integration of 1 million new users, but can this desperate attempt to cut Myspace back in the loop, blow up in their face? Yes. Integration works both ways, first company a shares with company b, just as company b shares with the company a. In this example, the element that both companies would be “sharing” is its members. In this scenario I don’t believe Myspace’ integration techniques such as suggesting its members to use other platforms will bode well for business. Myspace is hoping that by being a central network to connect to all these social networking sites, games and music that it can maintain dominance and market growth. Lets just hope their right…

Facebook Tops Myspace & Linkedin as the most loyal site

Wikipedia.org/wiki/myspace

Starbucks unveils the future of payments

As Starbucks moves to dominate the retail coffee market even further, they have unveiled a new payment method that will allow customers to conduct transactions without the use of cash or credit cards.  Could this be the new wave of the future? If so, what implications could this have for the rest of the financial markets?

According to Starbucks, this process of using mobile 2-d technology to scan a payment method can be quicker, more convenient and reduce customer wait time. The technology works by allowing Starbucks users to add funds, track points or reload cards to a Paypal or credit card, which consumers can then use their phone to access their account and "touch to pay". This can be done while waiting in line and when the customer gets to the front, all they have to do is swipe their phone. Ingenious, isn't it?

With the unveiling of this new process in remote locations such as San Francisco and Seattle, exposure from these markets will allow the company to judge whether the demand is there to begin operations of this platform via their 6,800 other retail locations. These advancements in the area of mobile transactions can only be made however if you own a smartphone or any device that can download "apps".

If this venture is successful, it will cause an immediate impact in the demand for wireless communications technology and advances in telecommunications, where bandwidth is currently being capped due to over-usage. I suggest keeping an eye on transaction based companies such as PayPal or wireless communications development companies because this might be catalyst for extensive growth in the tech sector. The long term implications of mobile payments on the financial markets are uncertain, but the short term possibilities are clear. We are transcending into wallet-less, wireless world and bandwidth is the new black gold!