Jump to Main ContentJump to Primary Navigation

Facebook deal is a sign of technology values gone mad

    Facebook deal was “mad” (Photo: AP)
    Facebook deal was “mad” (Photo: AP)

    There is a natural cycle faced by financial markets across the globe.

    A generation of managers often leave space for successors to repeat their ghastly errors.

    One cannot help but feel that many blunders made in the late 1990s — when any enterprise with a website and “dot.com” attached to its name was seen as a sure winner — are being repeated.

    The apogee of one technology bubble that burst began in 2000, with AOL’s purchase of media corporation Time Warner for over $160 billion.

    At the time, the deal was seen as the perfect combination of top content with the world’s most popular supplier of internet services.

    But the trumped-up deal proved to be a disaster.

    The development of wireless technology meant that AOL’s domination of cyber-space was short-lived. As the madness of the deal became evident, many of the dot.com bubble stocks vanished as quickly as they had arrived.

    Facebook’s £11.4 billion purchase of messaging service WhatsApp, which was challenged by privacy groups this week, is a clear repetition of tech values gone mad.

    In its largest purchase to date, Mark Zuckerberg’s company lowered the risk by using Facebook shares to pay for WhatsApp, founded by Jewish-Ukrainian businessman Jan Koum.

    Defenders of the transaction, which was brokered by venture capital company Sequoia Capital, say it was imperative that Facebook find ways of bolstering its exposure to smartphones and tablets.

    However, the billion-pound price tag on an enterprise that has millions of users, but does not charge people for its services, is hard to explain away.

    Established tech giants appear to fear that their technological edge will evaporate. As a result, they rapidly acquire new technologies.

    Google has invested billions in robotic engineering and recently paid $3.2 billion to buy start-up Nest Labs, a maker of smart thermostats, that can be controlled from smartphones.

    Britain too seems to have succumbed to the love of all things digital. Last month, online goods seller Appliances Online launched and soared in value to £1.5 billion, a shade below the value of Dixons, owner of PC World and Currys, with its own formidable online offerings. Yet Appliances Online is barely profitable earning just £8.75 million or profit on £275.5 million of sales.

    The company is satisfying a niche market, but the idea it could compete with the buying and marketing power of Amazon, Tesco, Argos and Currys is a pure conjecture.

    It is not just newcomers that are benefitting from the digital revival. Online grocer Ocado, that acts as logistics site for WM Morrison and Waitrose, has seen its share price soar ten times to more than 500p, from a low point in 2012.

    Among the newcomers is the fashion retailer Boohoo that is floating on AIM market with a value of £500m. The name will evoke images of the burst of the last tech bubble when Soho fashion outfit Boo collapsed under its own hype.

    Nevertheless, the success of online retailer Asos, that mimics high-end brands at high street prices, has instilled confidence in the idea that such enterprises can work.

    From the United States to UK and Israel, technology has created riches beyond the dreams of avarice.

    Neil Hutchinson, the founder of Forward Internet Group, could become the UK’s first online billionaire.

    The 37-year-old’s company, of which he still owns 97 per cent of shares, provides the technology behind price-comparison website USwitch and is valued at £1.1 billion.

    Israeli billionaire Teddy Sagi this month took advantage of the booming demand for tech shares to sell off a 15 per cent stake in his gaming technology company Playtech — whereby he collected a £326 million.

    Sagi’s firm is the software brain behind William Hill’s highly successful gaming websites and also lending its technology prowess to Ladbroke.

    There must be concern that the current tech bubble will burn out like the last, thereby sending the prices of tech companies crashing and leaving ordinary investors, suckered in at the top of the market, high and dry.

    The clear winners will be those with durable technologies. But even giant players such Nokia, Hewlett-Packard, Blackberry and Motorola have learned that you are only as good as your last innovative product.

Israel

Israeli research reveals new way to fight viral...

Nathan Jeffay

Thursday, October 27, 2016

Israeli research reveals new way to fight viral...
Columnists

Addicted to technology

David Byers

Thursday, September 15, 2016

Addicted to technology
Uk News

Israeli invention helps paralysed woman finish ...

Josh Jackman

Monday, September 12, 2016

Israeli invention helps paralysed woman finish ...
Israel

College enables Orthodox to fill Israeli high-t...

Josh Jackman

Friday, October 21, 2016

College enables Orthodox to fill Israeli high-t...
Uk News

Israeli design suits Claire

Josh Jackman

Thursday, September 15, 2016

Israeli design suits Claire
Israel

L'chaim! But will drink app stick in the throat?

Josh Jackman

Friday, September 2, 2016

L'chaim! But will drink app stick in the throat?
World

New far-right code words emerge on social media

Daniel Sugarman

Monday, October 10, 2016

New far-right code words emerge on social media
Israel

Israel and Iran work together on major scientif...

Nathan Jeffay

Thursday, September 15, 2016

Israel and Iran work together on major scientif...
Israel

Wedding app saves red faces

Nathan Jeffay

Thursday, September 1, 2016

Wedding app saves red faces