The Social Media Bubble

Venture capital king Ben Horowitz, who apparently engineered Skype’s $8.5 billion sale to Microsoft, says there is no Internet investing bubble, for a number of reasons. “With costs 100 times lower, programmer productivity 10 times higher, and the market 50 times larger, it stands to reason that many more Internet businesses will work today than the last time around,” he argues.

Moreover, “software is eating the world,” transforming or obliterating industries like print publishing, music distribution, radio, and direct marketing, he notes. With so much new business right around the corner, he argued that the high stock prices attached to social media “have not become completely divorced from any rational thought."

What happens in bubbles is that people come up with all kinds of reasons why valuations that seem out of whack really are not out of whack.

The Social Media Bubble