Monday, June 20, 2011

Is the social network the business network?

An Associated Press story I read yesterday mentioned that with all the tech companies having IPOs (initial public offerings) of stocks, it feels a lot like 1999.  Back then in the dotcom boom days, people invested in companies that weren't even making a profit, simply in the hope that they would.

I think that given the present state of the world economy, investors will be more wary, but it isn't hard to understand their enthusiasm.  We use some of these companies daily when we're online and there is wide spread familiarity with their products.

In May alone, the Russian search engine Yandex, the US business networking site LinkedIn, and the Chinese social network Ren Ren all entered the Nasdaq.  Now Pandora, the Internet radio company, has gone public, too.

Consumer review site Angie's List is rumored to be preparing to go public, perhaps in August.  Groupon, which negotiates with businesses for coupons and vouchers, may also jump into the market.  And of course everyone is waiting for the social media giant Facebook to enter the arena, although this may not happen until next year.

Does this sound like another dotcom bubble ready to burst? I don't know.  It's reasonable to ask, what do these companies actually do to make money? Something investors should have asked 11 years ago.  But to be fair, much has changed since the year 2000.

The Internet has 2 billion users now, and social networking is a force in the business world.  Maybe now these stocks make sense in a way that the dotcoms of the last decade did not?

(For this post, I read a variety of articles from the Associated Press, Business Week, Fox Business News, and Forbes Magazine.  I found the cool bubble pic at ilovebacteria.com.)

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