Dot Com Bomb 2.0?

by David Dekker on February 4, 2008

in Just Sayin'

Having personally survived and thrived during the first “dot com bomb”, it appears to me that we could be heading for a version 2.0… A lot of what’s happening in today’s marketplace seems eerily similar to 2000 – just with different terminology… I’d like to think we have all learned our lesson from back then, but something tells me we haven’t. Flash back to March 10th of 2000 when the NASDAQ composite index surpassed 5,000 points. Business was golden, everyone thought they were a day-trader, everyone’s stocks were soaring and then all of a sudden 5 days later the market loses 9%, hits a couple peaks and valleys, and then promptly bombs…

People pointed out obvious flaws of inflated stock prices due to prices being based on potential and not profitability – and therefore the mega dot com IPO’s were doomed from day one. Well now here we are 7.5 years later, and all we’ve done is removed the three letters I, P and O and inserted the letters M and A. Yes – we have learned that profitability is the king to the stock market, and as I write this Google has just surpassed $600/share and is a glorious example of a profitable company with a skyrocketed share price (correct me if I’m wrong – but Google’s value just went up $25 BILLION in the last month), but what about all of the mergers and acquisitions that are going on?

I’m far from an accountant – but I’m pretty sure that acquisitions are treated separately on the books than a standard operating expense – so does that make recent acquisitions look less appealing? The likes of Google, Yahoo, WPP and many more have been gobbling up anything to do with interactive with the vision that interactive is the future. I completely agree with their thoughts and ideas, and I believe that at some point in time interactive will be the dominant marketing piece – but when you drill down a little deeper, yes, interactive seems to be growing at a 30% clip each year, but interactive is nothing more than a mere sliver of the marketing medium. The overall marketing dollars are only increasing 2-3% each year – and yes, that includes interactives mammoth 30% growth… So companies like Google are paying $3.1 billion for DoubleClick, but can DoubleClick actually add those kind of incremental returns in a marketplace that really isn’t growing more than 2-3% a year?

I’m sure they’re smarter than I am and the answer is yes – it can – but to me, it seems a lot like the IPO days where a few people got really rich and cashed out…

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