“a form of delusion”

SnapChat is “worth” more than $3 billion.

Okay, sure, depending on how you define the term worth.

If by worth you mean what some other person is willing to pay for it, then yes, sure. But if by worth you’re referring to the amount of value that might someday be derived from it, well then keep smoking crack. There is a finite window in which the Web 2.0 land grab will continue, and sellers should be thinking about cashing out sooner than later at this stage in the game. Especially now that all the big ones are public and bloated with massive cash war chests and “currency” in the form of obscenely high share prices.

This will not continue indefinitely, it never does. Mark Cuban didn’t wait around to change the world, he took the cash and ran.

The SnapChat kids are adorable, they probably envision a world of tomorrow in which disappearing text messages are worth trillions of dollars and change life and civilization as we know it. Or maybe they think they can break Zuckerberg’s balls for a few more months and eventually extract $5 billion from him as Facebook grows increasingly worried about “losing the younger teens!”

Who knows?

Fun to watch either way. Facebook can afford to pay a few billion for SnapChat and then quietly write half of it down a year from now. What it cannot afford – at least in its own mind – is to let Google get it. Let the insanity begin.

And yes, it’s a mini-bubble effecting and enriching a handful of people, but it’s not yet a full-blown bubble. Also, there’s plenty of skepticism in the media this time around. I was there last time – they were chugging the Kool-Aid like frat boys even as their very jobs were being threatened.

Here’s the Los Angeles Times this morning:

Snapchat is not even 3 years old. It’s run by a couple of twentysomethings with no prior business experience. And it has never made a cent.

Yet investors are fighting for the opportunity to throw hundreds of millions at the mobile messaging service that is all the rage with teens.

The tiny Venice Beach start-up just turned down a $3-billion all-cash offer from Facebook Inc. And then, according to the Silicon Valley rumor mill, it rejected an offer from Google Inc., this one for $4 billion…

The tech industry may not be in another bubble, said Aswath Damodaran, professor of finance at the Stern School of Business at New York University, referring to the rapid rise and fall of Internet companies in the late 1990s and early 2000s. But these paper valuations are a “form of delusion,” he said.

What is pushing up the price tags? The ability of these companies to draw a fast-growing following of young users, analysts say.

Yes, young users are the key to crazy valuations. If only said young users had a clue as to their value – they might actually ask for a couple of dollars at some point rather than contentedly have their content and identities sheared from them like wool from a lamb.


Social media start-ups’ value is enormous — if you trust investors (LA Times)



This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. immediate edge reviews commented on Sep 22

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  2. 메이저토토사이트 commented on Sep 26

    … [Trackback]

    […] Find More Information here to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  3. bitcoin evolution es real commented on Sep 29

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  4. automated bitcoin investing commented on Sep 30

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  5. 토토 commented on Oct 17

    … [Trackback]

    […] Find More Information here on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  6. travel hacking commented on Oct 29

    … [Trackback]

    […] Read More on to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  7. 토토사이트 commented on Nov 01

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  8. here commented on Nov 17

    … [Trackback]

    […] Information to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  9. scotia bank login commented on Dec 20

    … [Trackback]

    […] Read More here on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  10. bank of montreal online banking commented on Jan 12

    … [Trackback]

    […] Here you will find 55240 additional Info to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  11. Regression Testing commented on Jan 16

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  12. cibc banking commented on Jan 27

    … [Trackback]

    […] Find More here to that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]

  13. www.zonnepaneelwereld.nl commented on Feb 02

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2013/11/16/a-form-of-delusion/ […]