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Last spring, the crowning moment of the new tech boom was about to arrive: Facebook’s IPO. But now that its stock has tanked, and with the company’s symbiotic (or is that parasitic?) partner Zynga also flagging, it’s logical to wonder: Is the boom just another bubble?
Despite these high-profile deflations, most experts don’t seem to think so. “Silicon Valley by its nature has always been frothy,” says Paul Saffo, managing director at Discern Analytics, a San Francisco investment-research firm. But with the Facebook situation, he says, we saw a self-correction of the sort that didn’t happen during the last tech-stock bust, in 1999. “Facebook was pricing itself at a bubble level, and the market said, ‘Not so fast, we’re not getting on board.’ This time around, investors are asking hard questions. Nobody is bidding up the stock just because the company has a cute sock puppet."
Tony Perkins knows bubbles—he cowrote The Internet Bubble at the height of the last boom and is the head of AlwaysOn, a media network for venture-backed companies. He, too, thinks this go-round is different. Today’s public companies, he explains—even the hard-hit Zynga—are legitimate, moneymaking businesses, as compared with the early dot-coms, which didn’t have profits, or sometimes even revenue. Plus, the presence of large, public, profitable, and well-capitalized companies such as Facebook, Google, eBay, and LinkedIn creates more opportunities for startups to get acquired (e.g., Instagram) and keep the good times rolling.
Perkins also points out that when startups fail, they don’t destroy the whole market. “The bubble of 1999 basically tanked the entire carnival when it popped,” he says. That year, so many of the startups had gone public that when the bubble burst, $5 trillion in NASDAQ stock-market value eventually disappeared with it. Only a handful of today’s startups have gone public, and those that have are priced on more conventional, and less speculative, scales, notes Perkins.
Sylvia Paull, a longtime tech publicist in Albany, goes one step further and claims that not only don’t we have a bubble today, we didn’t even have one in 1999. “Why do they call it a bubble?” she asks. “I call it a Darwinian evolution. It’s survival of the fittest. Who cares about the companies that no longer exist?”
Read more: How Much Tech Can One City Take?