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In 2016, Silicon Valley is facing the contraction of another boom/bust cycle. Investors are starting to admit that some of their big bets aren't worth what they were financed for: some have gone IPO at prices lower than their financing. Then, of course, there are the inevitable bankruptcies and closures.
Who do you think is marked for doom? Who do you think will recover from their current unfortunate situations? Edited to reflect Yahoo Q4 2015 earnings and probable fraud at Theranos. Mod Edit: Discendo Vox posted:
Somebody fucked around with this message at 05:53 on Feb 25, 2016 |
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Feb 6, 2016 19:45
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My intuition is that the most vulnerable sort of companies are: 1) Startups that don't seem to have a strategy other than "get acquired" 2) Large companies that don't seem to have a strategy other than "buy startups and hope that turns us around!" Yahoo has definitely been in slot 2 for a while, but so have quite a few other giants. But most of them still have actual profit-generating segments and huge stockpiles of cash -- most of these acquisitions were done with stored cash and shares rather than borrowed money. So bankruptcy is much less likely in that scenario compared with just burning away stock value.
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Feb 6, 2016 20:01
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ShadowHawk posted:1) Startups that don't seem to have a strategy other than "get acquired" 3) Any social-media companies whose revenue depends on advertising (turns out there's a massive industry of fake clicks) 4) Any company with a single product, especially if that product is vulnerable to new generations of cellphone hardware and software.
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Feb 6, 2016 20:08
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Am I the only one that's amazed Yahoo! even still exists? They feel like a relic from a former era at this point.
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Feb 6, 2016 20:29
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ToxicSlurpee posted:Am I the only one that's amazed Yahoo! even still exists? They feel like a relic from a former era at this point.
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Feb 6, 2016 20:30
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Yahoo's been hosed for quite a while now, I thought this was common knowledge. Of the others, GoPro and Dropbox at least have something they can charge people money for, even though the former gets more and more competition from China (I bought a Xiaomi Yi which is 90% as good at 1/3 of the price) and the latter can be replicated by any idiot with an S3 account. I still haven't figured out what the gently caress Square does.
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Feb 6, 2016 20:31
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mobby_6kl posted:I still haven't figured out what the gently caress Square does.
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Feb 6, 2016 20:33
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Oooh ok, I remember seeing that and it kind of makes sense. I was probably confusing it withe the similarly sounding social thingy. So they might've been overvalued at IPO (whoa) but at least they have something going on there - unless the upcoming chip & pin is going to be impractical to implement, in which case they're hosed too, I guess.
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Feb 6, 2016 20:45
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mobby_6kl posted:Oooh ok, I remember seeing that and it kind of makes sense. I was probably confusing it withe the similarly sounding social thingy. So they might've been overvalued at IPO (whoa) but at least they have something going on there - unless the upcoming chip & pin is going to be impractical to implement, in which case they're hosed too, I guess.
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Feb 6, 2016 22:36
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I have friends with small businesses who swear by Square. It delivers a useful service that actually fills a needed economic niche. I agree that it's probably gonna last a while even if the IPO was way too high.
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Feb 6, 2016 22:44
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Feb 7, 2016 05:23
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Reminds me of this: That image also makes me irrationally upset that my company not only gets stuck with a logo that was never made permanent, but is also in only one category despite having a strong position in multiple markets.
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Feb 7, 2016 13:29
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There's no way 90% of those aren't dead as gently caress.
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Feb 7, 2016 13:59
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It's almost as if the only barrier to entry for advertising is the ability to bullshit, while doing useful things competently is not something everyone can do.
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Feb 7, 2016 15:51
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Square and Dropbox have real life earth money revenue streams and will probably survive or be bought by larger conglomerates for handsome prices. I expect Google would like to purchase Square, as it integrates well with their Google wallet thingy; they already have Google Drive which directly competes with Dropbox. The others are fully reliant on space money and that won't last forever. If they aren't making any earth money when the bubble pops they're hosed.
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Feb 7, 2016 16:40
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Arsenic Lupin posted:Square is what lets small vendors (craft fairs, bubble tea shops, like that) offer credit-card services (A) by wi-fi or cellphone (B) without a large investment in hardware. Yeah, Square is all over that market and has been for quite a while - it's somewhat invisible to the user but it's been legitimately good for small vendors from everything I've heard, especially if you know how CC/Debit fees are structured through more traditional means. ShadowHawk posted:My intuition is that the most vulnerable sort of companies are: Yahoo has been in slot 2 for something close to a decade, especially after opting out of the search market. Many years ago (before Marissa) the joke was that Yahoo US was worth -4B, as you could take it's stock valuation and subtract it's holdings in Alibaba and Yahoo Japan. At this point most startups may not have an exit plan, but as long as their founders and early VC have one they are OK in the sense that they achieved some of what they set out to do. I suspect a lot of companies will end up in that 3rd option - being milked by insiders/executives on their way down as long as they can, purging employees along the way. New executives will come in and continue the process, but realistically they are aware enough to know that they aren't going to turn it around, but they will get 10M+/year in the process. At this point the cash-rich giants are well aware that the market downturn is coming (or here) and know that they can scoop up what they want for much better prices. This also includes the labor market shifting back to something more normal (but ideally not the mess it was in the early 2000's). Overall there's lots of companies that can survive the downturn and have good core businesses, but a lot of them are too big for various reasons and their expansions in to other areas haven't panned out. There is another set of companies that are highly vulnerable, and that's companies who primarily sell/license to startups and smaller tech companies. During the 90's the Aeron chair was the widespread and understood example, but I'm thinking more about hosted services like github, atlassian, teamcity, jenkins, artifactory, cloudera, etc. Big companies will build their own solutions based off of open-source tech or whatever they've had running for a decade. Really small ones will use the free version or open source, but the area between the two is where you get people paying for those hosted services. If a whole crapload of their customers are suffering from the downturn, those companies will as well. Controlling external costs is one of the first things companies will do when looking to get their cash flow under control. edit: turns out there is a github story already http://www.businessinsider.com/github-the-full-inside-story-2016-2 Expect this to repeat itself across a lot of the industry. Pervis fucked around with this message at 17:23 on Feb 7, 2016 |
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Feb 7, 2016 17:20
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ShadowHawk posted:Ahh yes you were probably confusing it with FourSquare, which is a great candidate for the bankruptcy roulette Whoa. They're still in business? e: It won't hurt them significantly, but Amazon and Google are definitely going to feel some pain as all the mid-level companies who used them as a cloud platform collapse. My guess is there'll also be a big shakeout in advertising and tracking. Arsenic Lupin fucked around with this message at 18:13 on Feb 7, 2016 |
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Feb 7, 2016 18:07
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How is Adobe a Backbone Platform?
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Feb 7, 2016 18:32
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Arsenic Lupin posted:e: It won't hurt them significantly, but Amazon and Google are definitely going to feel some pain as all the mid-level companies who used them as a cloud platform collapse. My guess is there'll also be a big shakeout in advertising and tracking.
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Feb 7, 2016 18:56
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ShadowHawk posted:It's really unclear what percentage of cloud business is a large collection of small customers and what percentage is a few really big customers. For instance it wouldn't at all surprise me if 80% of Amazon's cloud business was Netflix and other parts of Amazon itself.
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Feb 7, 2016 19:03
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So when do people think the first stragglers will start to drop? Pundits seem to be insisting that a minor recession is set to come any second now, so that seems like a good time for it to happen. If it doesn't happen for a while how long will companies like Yahoo hold out?
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Feb 7, 2016 19:29
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Yahoo is worth more dead than alive. It'll get carved up or sold to Verizon or whatever. Twitter makes sense for Google in that it's not Google+, but it is what it is: a vestige for elite opinion, and that's not going to see double digit growth. It does have value for advertisers although not as much as its competitors. My old boss unironically had this hung up in his office as a point of pride.
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Feb 7, 2016 19:35
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There was another thread going for a while about online advertising that wondered this same question, albeit in different terms against different areas. That graph going around is not the entire story. I notice at least some of those items are open-source software, or otherwise items of nonprofit, but the saturation is certainly going up in advertising while the underlying tech itself still seems reasonably sized. (At least, categorically.) Personally, I am hoping that the next downcycle affects adtech the most. It's currently the double-edged sword that is funding most media as a business model while simultaneously being the biggest conduit towards mass surveillance and privacy. (One of the biggest sources of security concern for general software development at the moment.) Even if it takes out a lot of other things along the way, I'll be happy if adtech is set back for a few years.
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Feb 7, 2016 20:01
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mobby_6kl posted:Oooh ok, I remember seeing that and it kind of makes sense. I was probably confusing it withe the similarly sounding social thingy. So they might've been overvalued at IPO (whoa) but at least they have something going on there - unless the upcoming chip & pin is going to be impractical to implement, in which case they're hosed too, I guess. Er, chip and pin has been around for a good decade? Or is this a weird case of America lagging way behind Europe?
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Feb 7, 2016 20:04
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Spuckuk posted:Er, chip and pin has been around for a good decade? It's a weird case of America lagging way behind Europe. Also we aren't doing the PIN part. e: Mashable and the Wall Street Journal have great articles explaining click fraud. A big part of the problem is publishers who use "sourced traffic", in which they pay third parties to direct traffic their way. A 2013 article by a guy who made money from bot clicks on ads. quote:My conversations with [these ad networks] were similar: They would let me decide how much I was willing to pay for traffic, and when I told them $0.002 or below, they made it clear they had little control over the quality of traffic they would send at that price. Quality didn’t really matter to us, though. As a website running an arbitrage model, all that mattered was profit, and for every $0.002 visit we were buying, we were making between $0.0025 and $0.004 selling display ads through networks and exchanges. Arsenic Lupin fucked around with this message at 20:12 on Feb 7, 2016 |
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Feb 7, 2016 20:06
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Arsenic Lupin posted:Square is what lets small vendors (craft fairs, bubble tea shops, like that) offer credit-card services (A) by wi-fi or cellphone (B) without a large investment in hardware. Square probably has a safe space for a while; chip and pin is a goddamn clusterfuck right now. If you're a local auto shop, electrician, etc. it's probably a million times easier to buy an iPad and use it as a mobile WiFi hotspot with one of their readers than it is to handle personal checks. I'd love to tinker with one of their systems out of curiosity.
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Feb 7, 2016 20:29
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Mo_Steel posted:Square probably has a safe space for a while; chip and pin is a goddamn clusterfuck right now. If you're a local auto shop, electrician, etc. it's probably a million times easier to buy an iPad and use it as a mobile WiFi hotspot with one of their readers than it is to handle personal checks. I'd love to tinker with one of their systems out of curiosity. Square also has a contactless chip system ready to go. It's not as cute and small as the original version, but it should do, assuming it works.
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Feb 7, 2016 20:38
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Mo_Steel posted:Square probably has a safe space for a while; chip and pin is a goddamn clusterfuck right now. If you're a local auto shop, electrician, etc. it's probably a million times easier to buy an iPad and use it as a mobile WiFi hotspot with one of their readers than it is to handle personal checks. I'd love to tinker with one of their systems out of curiosity. I've been seeing more and more installs of some iPad-based POS install in various mom-and-pop stores in response to EMV that I'm pretty sure isn't Square (it has some plastic hood you can place over the iPad for privacy when entering your PIN, in case someone can better identify it), so I'm not sure how stable Square's base really is in the long run.
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Feb 7, 2016 20:48
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ComradeCosmobot posted:I've been seeing more and more installs of some iPad-based POS install in various mom-and-pop stores in response to EMV that I'm pretty sure isn't Square (it has some plastic hood you can place over the iPad for privacy when entering your PIN, in case someone can better identify it), so I'm not sure how stable Square's base really is in the long run. I'd be interested if there are any publicly available market studies on them; my gut feeling is that the customer base for those sorts of setups is growing because of how new the NFC / e-wallet stuff is, so whether or not Square has majority share or not I'd expect them to do fine for a few years. Once it becomes prevalent and the number of companies that could use those systems hits saturation, then it gets interesting in terms of cost / integration with other software / reliability. Long run is harder to predict; if the economy hits small businesses hard in a downturn they might decide their current payment process is good enough to carry forward for another 3-5 years instead of upgrading.
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Feb 7, 2016 22:46
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Square is an ok product but they have been pretty unsuccessful at everything beyond the reader and its various iterations. Their margins are pretty awful AFAIK. They are also going to have serious problems retaining talent (most of my friends there have left already, and I've heard things like relatively recent hires having stock options with strike prices way, way higher than the current value of the stock, meaning that they are effectively worthless). That being said, based on the space and the quality of their product I think they have a 'floor' relative to existing demand and how much better they are than the rest of the market. The Yahoo core business definitely doesn't have any sort of floor, and I don't really think GoPro does either.
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Feb 8, 2016 00:12
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blah_blah posted:(most of my friends there have left already, and I've heard things like relatively recent hires having stock options with strike prices way, way higher than the current value of the stock, meaning that they are effectively worthless). Isn't this ... kind of missing the point of stock options? At worst, they should be at the day's value when you joined.
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Feb 8, 2016 01:17
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Arsenic Lupin posted:Isn't this ... kind of missing the point of stock options? At worst, they should be at the day's value when you joined. 
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Feb 8, 2016 01:19
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ShadowHawk posted:Yeah, and they joined when the stock was way higher Contrariwise, I had a friend who built his house by getting a loan secured against his ParcPlace shares. That ... didn't end well.
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Feb 8, 2016 02:42
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Arsenic Lupin posted:Isn't this ... kind of missing the point of stock options? At worst, they should be at the day's value when you joined. Post-IPO companies usually move to RSUs rather than options, and even some of the unicorns like Uber give RSUs. But Square was giving options, and the strike price was high enough that they are likely close to worthless for people who joined in 2015. Note that in this sort of scenario it's actually possible for the employee to actually lose money; if you exercise your options at $X and the stock drops below that value and stays there, you are pretty much screwed (see e.g. this recent example). I doubt that this would have affected anyone at Square though.
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Feb 8, 2016 03:09
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blah_blah posted:Note that in this sort of scenario it's actually possible for the employee to actually lose money; if you exercise your options at $X and the stock drops below that value and stays there, you are pretty much screwed (see e.g. this recent example). I doubt that this would have affected anyone at Square though. I am not (so not) a tax lawyer, consult a professional on these things.
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Feb 8, 2016 03:28
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Startups are always lottery tickets but a ticket you can actually lose vast sums on is hilarious.
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Feb 8, 2016 03:38
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Arsenic Lupin posted:It's even worse than that. You're taxed at vesting. If you got your options for free or almost nothing, that's a big hit, because your cost basis is nearly zero. If stocks vest, you hold them, and they then fall in value (not uncommon) you wind up having to pay taxes on money you never actually had. Yeah, I don't think you're fully understanding the issues here. There is very little downside risk to RSUs because you can just sell upon vesting. There is often significant downside risk to options, especially for a rapidly growing company, because for optimal tax treatment you typically want to exercise early (you are generally not forced to exercise as long as you remain employed by the company, but failing to exercise early opens you up to a gigantic AMT bill when your company IPOs).
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Feb 8, 2016 03:44
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I think you were right, I was confusing the perils of options with the perils of RSUs. Buy options for $.07 when you join the company, get imputed income when the options vest at IPO, stock falls before you can sell it (within the restricted period). Fun fun.
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Feb 8, 2016 04:37
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I hope the current crop of online "do my chores so I can bask in bourgeois awesomeness" companies all get screwed.
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Feb 8, 2016 04:44
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A visitor to the bay area can look at the outdoor ads to see just how ideological this place has become. Mattresses are being target-advertised to techies. Mattresses! And Red Bull, their whole advertising angle here is that every bay area commuter is a startup founder and Red Bull will make them rich.
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Feb 8, 2016 04:52
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