The Cauldron Bubbles: Social, Location, and Mobile, Oh My!

What is value? What creates wealth? It used to be control. Now it is information.

The dramatic shift in wealth creation started with Google. It was the Mountain View-based search giant, after all, who created a company religion of Information Ecology. This is in contrast to organizations like DeBeers which famously controls the Diamond industry with great effect. To Googlers, there is no piece of information without value. One could argue that this alignment, the recognition that information, not services, had become the truly valuable commodity, laid the blueprint for organizations like Facebook.

Google leverages services as a means of information capture. Search, Mail, Shopping comparison; all of the Google services are intended to create an ever-more accurate database of consumer intention and sentiment. The one place that Google didn’t perform information capture, was in your social relationships. Enter Facebook.

Facebook differs from its predecessors in a few key areas. Whereas MySpace and the cadre of other social networks were about tangential connections, Facebook drove content exchange and interaction. Facebook is therefore creating value through information extraction related to the exchange of information within their network. Facebook may have built the world’s most accurate demographic database, but my question relates to monetization.

Facebook makes money with Advertising, the same as Google does, and in the same method by which every information service online monetizes. Advertising doesn’t create value. Advertising is an attempt to create interest in a product or service. Put another way, Advertising does nothing to advance humanity, and, if anything, may detract from it.

How is it then, that Instagram, a company with 20 employees, 0 revenues, and no monetization strategy, gets acquired for 1 billion dollars? The answer is that value is now perception, and the current prevailing mindset is that knowing what your users are doing and where they are is the most valuable information in the world today. But let’s examine this idea for a second.

Is it true that knowing that I’m at the Movies is more valuable than a medical breakthrough? Is digital farming more valuable than Mining Asteroids? Recently James Cameron spoke about a joint venture with Google in pursuit of Mining Asteroids. The investment was 2.6 Billion. Is there some cosmic equivalency scale where we can compare Photo Sharing to Interstellar excavation, and on this scale, is it possible that these two different ideas are this close in value?

It came to my attention recently that Facebook’s IPO valuation of 100 Billion is roughly equivalent to Cisco’s current Market Capitalization. Is Facebook worth as much as Cisco? Although Facebook directly interacts with all three of the dominant market trends, Social, Location and Mobile (SoLoMo); Cisco is integral to all of them.

We live in a world where a lot of companies are building valuable databases. The companies that create products are valued less than the companies which create vapor. It is a bubble, and an application bubble at that. Social, location and mobile are ephemera, to confuse them with companies that exhibit enduring value is a mistake.

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