Web 2.0 Bubble?

Last week we posted a video of Peter Thiel saying that there is absolutely no bubble in technology. This week we offer the opposite view. We think you will enjoy this one . . .



Hat Tip: Ritholtz

Peter Thiel: "There is Absolutely No Bubble in Technology"

Peter Thiel is one of the great stories of the last decade. He has an undergraduate degree in Philosophy and a law degree from Stanford and was running a small hedge fund when he bumped into tech whiz kid Max Levchin (now with Slide). Together Max and Peter co-founded PayPal, eventually taking the company to IPO and then sale to EBay. Now Peter runs a successful macro hedge fund - Clarium Capital Management - with over $2 billion in AUM. He also started the Founders Fund, a founder-friendly venture capital fund with significant investments in Facebook, Slide, Jaxtr etc.

The clip below is from Kara Swisher's interview with Peter earlier this month. In it Peter discusses the major trends in the media, how old media companies can and should adapt, how Web 2.0 companies can monetize their users, and perhaps most importantly whether Web 2.0 companies are overhyped. The answer (from a guy who is an early Facebook investor) is absolutely not. His argument on Facebook is the following: if the growth (of users I assume) continues for 2 years Facebook will be worth a factor of 10. If the revenue model works thats a nother factor of 10. Using simple math, if the company is successful on both fronts the company is worth a factor of 100. I'm not too worried about number 1. Facebook has been dead on in its user interface and ability to get users to consistently visit the site. But the monetization question is a big question, and without it Facebook may not even be worth $15 billion.

I do however like Peter's analysis of bubbles:

"I was here in 1999-2000 and it is not like this, even remotely . . . The other point is the history has just been . . we had a boom and a bust, and people remember the bust better than the boom. People are stilling dominated by fear not by greed, we are barely getting out of that. I don't think things are over-hyped. I don't think Facebook is over-hyped. I think almost none of these companies are. Some will turn out to be very valuable, some will turn out to be a lot less valuable. In aggregate I don't think there is a bubble at all. There is a bubble in housing, their is a bubble in China, there is probably a bubble in Private Equity funds and the finance industry but there is absolutely no bubble in technology."

(I apologize, the video is a little bit larger than the space I have here!)