Remember the exuberant enthusiasm of the dot.com boom? I remember that I was sucked in. I remember having a discussion with a wise friend about the elevated stock prices of the dot.com companies and finally declaring something like “the rules have changed!” I held that with greater wealth, more time, and broader access to trading, more and more individuals, the both of us, for example, were buying stocks than ever before. This new influx of cash is what has elevated the stock market to such dizzy heights.
I was probably right about that. All of us jumped in and elevated stock prices even for companies that had no reason to exist! Even I recognized that companies known more for sock-puppet brands than good ideas (not to mention, actual businesses) weren’t worth investing in. Still, overall, I had convinced myself that this was a new economy that justified company valuations that were greater than the gross domestic product of the average African nation.
Dot.com companies often spent huge amounts of capital to buy brand names and capabilities of companies whose services they gave away in order to attract more recognition. They were selling ideas more than products.
Today, there is still one company that behaves this way: Google. Check out Google’s near linear increase in stock value from inception at around 100 to around 480 today. Recently Google purchased YouTube and just today JotSpot.
YouTube has a tremendous brand with all the dot.com’s original buzzwords like eyeballs and stickiness. But do they make any money? JotSpot has some nice technologies for webbased applications which fits well with Googles growing online, collabrative editing for wordprocessing and spreadsheets. JotSpot used to charge people for its services. As of today, they’re free–thanks Google! Not sure how that creates stockholder value though.
I don’t own any Google shares. I’ve always thought they were too expensive, and the fact that they have risen nearly continuously just means that I get more right about them being expensive and more wrong about not buying any everyday. Google is frighteningly similar to all those failed dot.com companies who had giant stock prices with huge multiples of profit to earnings, all the while making news most of all for services that they gave away! Still, Google seems different. They’ve lasted a long time this way and they just seem so damn smart! I use several Google applications and each of them is an amazing peice of work that in a small or large way changes the way I work and create and live. No one can just write Google off as another sock puppet. Their innovative ideas for generating revenue and spawned who new notions in business such as the Long Tail Effect.
Given my previous track-record, I want to think I’ve learned something. Google is just the last dot.com. They’re inflated stock price is unjustified and they’re bubble has got to burst sometime. Except I don’t believe it. I keep thinking the rules have changed somehow and that they’ll make it work. Maybe I better scrape together nearly $500 to buy at least one share! But then, tonight is t-shirt Tuesday at the Mt. Sun Pub and Brewery and one share of Google represents a whole lot of beers (almost 250)! Oh well, priorities.
Mmm. Mt. Sun beer.