With financial markets in turmoil, two of the internet industry's hottest properties — daily-deal site Groupon and social-media game developer Zynga — are putting off their initial public offerings of stock. The eagerly anticipated Groupon and Zynga IPOs were supposed to cap a boomlet for internet startups, but now skittish investors fear the companies are not worth as much as once thought. Is this a sign the tech bubble is about to pop?
Bubble 2.0 is done: Investors were seeing "dollar signs everywhere" in the wake of LinkedIn's huge IPO splash, says TelecomTV, and Groupon's controversial 29-year-old founder and CEO, Andrew Mason, was looking to haul in $25 billion or more with an IPO of his own. But the "investor frenzy" is fading as everyone realizes at once that tech IPOs are "more of a gamble than ever" now that a new global recession is looming. The only question is whether the balloon deflates "with a feeble 'pffutt'" or a loud pop.
"Groupon pulls IPO as second dot-com bubble starts to leak"
It's just Groupon that's in trouble: "I don't believe Bubble 2.0 is ending," says Simit Patel at Seeking Alpha. But the Groupon bubble certainly is. Groupon's rather puzzling strategy seems to be "get a lot of users and then make money" — the company is spending far more than it brings in in an attempt to woo customers. That's the "recipe for failure" that produced the first internet bubble and people are quickly realizing that Groupon is on shaky ground.
"Bubble 2.0 isn't still on for Groupon"
Time will tell: The news of Groupon's delay "hit Silicon Valley with a thud," says Emi Kolawole at The Washington Post. But it's too early to say whether the social media bubble has "popped... or merely been delayed." We'll know the true fate of the social media investment craze once we see "how long Groupon and Zynga will wait before going public and what they'll do during that time."
"The Groupon IPO's delayed. Whither the social media bubble?"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why you should stop believing in evolution
- How Israel's hawks intimidated and silenced the last remnants of the anti-war left
- Why your employer should clean your house and do your laundry
- The secret to handling pressure like astronauts, Navy SEALs, and samurai
- The big policy question libertarians can't answer
- Why China thinks it could defeat the U.S. in battle
- What you need to know before you support the police in Ferguson
- Welcome to the age of ambivalent feminism
- What would a U.S.-Russia war look like?
- How the West produces jihadi tourists
Subscribe to the Week