Liam Dann: Facebook deal points to bubble trouble

'The internet is a pain within the arse," laconic British rock star Noel Gallagher told a press conference this week.

"i used to be expecting a section more ... it's really only a lot of individuals on there moaning and complaining."

Sadly that's often true.

But for better or worse the net has only just begun to rework our world.

The migration of the media from print to website, or from disc to download, with the entire associated angst and discussion, are both small steps compared with the social change the net will soon unleash.

Analyze retailing.

What's going to we installed our high streets when the garments retailers go the way in which of the book and music shops? What is going to our workplaces seem like after we are all connected in real time by video links?

The impact of the net at the traditional business model and the rate with which it's having that impact never fail to amaze.

Facebook's US$1 billion ($1.2 billion) purchase of mobile photosharing application Instagram is the most recent example.

Intuitively an organization with a paper value of US$100 billion buying a corporation with out a revenue and 13 staff for US$1 billion screams South Sea Bubble, Dutch Tulipmania or dot.com crash. That's even after reading the hip, techie blogs that emerged so quickly to inform us why this isn't a bubble deal.

Lots of those bloggers have confused scepticism in regards to the deal for scepticism in regards to the internet itself.

The web seriously isn't a bubble that may pop. And yes, businesses want to sustain. Most small and medium-sized companies in New Zealand don't actually have a website.

However, Facebook is a listed company with a stock price which may very definitely be inflated to the purpose of explosion.

Given the effect that might have on US markets, it is the final thing the arena needs. Facebook's move just isn't without internal logic. Its management understands the necessity to evolve rapidly. Facebook must offer greater than just its original webpage interface or it won't last long enough to justify its valuation.

Instagram is worth US$1 billion because that was what someone was prepared to pay for it. But few aside from Facebook can have paid that much. It is going to afford to lose one billion. It can't afford to lose the race to dominate the photosharing space on the web.

The velocity of evolution on the internet is where the danger lies.

Several US writers have mentioned that Facebook has given two-year-old Instagram a better value than the venerable Big apple Times.

Even taking into consideration the structural challenges facing newspapers, the brand new York Times brand faces no threat from a number of journalism students who think they are able to report the scoop better.

Instagram and any collection of web-based applications, including Facebook, do.

The power to throw one thousand million at Instagram shows Facebook is in an area where money has a unique value than it does for other companies. That's always an awfully risky space to be.

Another hint of a tech bubble emerged with news that the capitalisation of Apple topped US$600 billion. It is just the second one company to arrive that valuation.

The last was Microsoft, which topped it for a short while in 2000 - the peak of a tech bubble.

The over-valuation of both Facebook and Apple could become an incredibly real problem if either starts to expire of steam at the growth front. Neither has yet delivered profits or dividends to justify their enormous valuations. The focal point for both have been pouring a refund into the business. Investors are very tolerant of this while the stock prices rise.

a quick, sharp revaluation of either could be a timely reminder that the market should maintain some variety of correlation between value and real world profit.

The opposite story this week that highlighted the growing power of the net was that of Christchurch band The Make Believe.

They seem to be a couple of teen boys with guitars and decent voices, the sort this country was churning out for years. They sat of their front room recently and filmed themselves covering a song by One Direction.

One Direction (if you really don't sustain) are the newest boy band sensation touring the sector and being mobbed by 13-year-old girls.

The web site for an influential US talent show host liked it enough to post a link to the YouTube clip.

Now the fellows have clocked up 600,000 hits on YouTube and feature picked up some style of management contract within the US.

Here's the brave new world of web marketing in action. It's wonderful to work out how plugged in adolescents are and the way entrepreneurial. Good luck to them.

These smart kids are growing up with a way of the internet's potential instilled from an early age. For an older generation who grew up on vinyl records and video cassette machines will probably be increasingly important to tackle the internet head on or be left within the dust.

It really is scary after what has already been 15 years or so of dramatic change to think of that this can just be the start of something. It's also exciting. It is a revolution without bloodshed and with enormous capacity to augment our lives.

The sole way we will hope to regulate it's by engaging with it and also you don't want one billion dollars to take action. That's the lesson for business.

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