E-Business Bubble Burst is Approaching?

I remember those days in 1998 – 2001 when Internet businesses are growing exponentially and suddenly, one by one, Internet businesses are gone bust, worldwide.

Today, the signs of the bubble burst are apparent. E-businesses’ value is growing to a point that it is no longer logical. Investments are pouring in with no significant dividend present. Warren Buffet will definitely not invest in Digg, Facebook or Twitter.

Some examples of e-business value

According to a TechCrunch’s article, Digg is valued at $175 million, revealed in the latest funding for the amount of $29 million. In

How’s the brand value of e-business? Again, from a TechCrunch’s article, Google brand value hit $100 billion, compared to other, off line, counterparts: Nintendo Wii – $8.25 billion, Toyota – $29.9 billion, and Vodafone – $53.72 billion.

Being aware of the signs of time

I believe in the concept of tipping point (Malcolm Gladwell’s.)

The value of e-businesses, especially those that operate in social media, has grown exponentially with unknown return on investment. For instance, Twitter has no monetization method so far, lives off from investors’ funding. Facebook is not making considerable profit (even I heard that it is loss-making), despite its effort in monetisation from advertisements. Digg is also just the same.

There will come the time when funding is not on sight anymore. There will come the time when businesses need cash flow because they are, indeed, businesses. Even non-profits need the cash flow to fund their activities. Of course, only time will tell when those will happen (or won’t happen.)

When the tipping point has been reached and the bubble is about to burst, everything will spiral down full-force, leaving investors scramble to bail out, adding the level of damage to the e-businesses. Some will survive, but many will fail.

My take: When the time comes, Twitter is the one on the hot seat – It moves past Facebook to be the most popular social media today a bit too fast. Be careful, Twitter – Unless you start site/traffic monetization and make a decent profit, I’m not sure whether you can stand your ground.

Will you and I be affected?

I’m not sure – Let’s wait and see. However, if you own online businesses, I have one tip for you: Stop believing too much in how much yours are valued at. Valuation is useless until you sell the businesses and put the money inside your pocket (a.k.a. the capital gain from the sales.) Your critical success factor, as in any other businesses, is your cash flow growth and ROI pace.

Here’s an example – Noobpreneur.com is valued at $7000 to $100,000 (from various simple but logical web valuation tools – Some other, questionable, tools value Noobpreneur.com up to $500,000) Am I happy? Of course. Am I proud? You bet. Am I $100,000 better off? Nope. I am $100,000 better off if and only if someone bought Noobpreneur.com for that price tag.

Again, if you own e-businesses, think how you can monetize yours well and invest in their development well, and stop measures your e-businesses or invest in e-businesses that use the keyword “potential.” Potential is good, but as a web investor you should prioritise business performance of today, not tomorrow.

Ivan Widjaya
Waiting for the bubble to burst (and benefit from it)
Image by nathalielaure.