"This time, it's different."
"When your barber starts giving you stock tips, it's time to sell"
"Automation and globalization are going to destroy the world." -> "We've been saying that for a hundred years." rolls eyes "This time, it's different."
"Current tech companies might actually have a legitimate sustainable business that won't be totally obliterated in an imminent market crash" -> "Remember 1999?" rolls eyes "This time, it's different."
In all seriousness, though, we had one dot-com bubble; I am not sure it's wise to extrapolate that all tech companies now and for all time are doomed to fail after a few years. Particularly since the companies listed are actually profitable.
They were supposed to be big buy and hold forever stocks. Interestingly looking back if you had bought and held for decades you would have done ok with the food type ones - McD and Coke and poorly with tech like DEC and Kodak. It's hard to build a tech company that will still be good 30 years later.
These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years. It's the exception for one of them to implode. This is especially true given that Facebook is still ramping, their sales growth is still extraordinary and their daily actives are still growing just fine for their size. They likely won't even peak on users for a few years, at a minimum; and afterward, they still have years to grow their non-US ad business a lot, because that part of their business is wildly non-optimized.
In ten years, Facebook will just be reaching the equivalent business plateau that Microsoft hit circa 2000-2003. They're still a very young business in the first half of their growth phase, they haven't even reached mild stagnation yet. A business doing $2 billion in quarterly profit, growing sales at 50%, and they're going to get eaten for lunch within a decade? It's extremely unlikely, as the mountain of cash they're accumulating will buy their continued place in the ecosystem, whether the anti-FB crowd likes it or not.
"They're big! They'll be here forever and only get bigger!"
Cargill, founded 1865, makes over $120B of revenue annually. (That's half of Apple, but two Google). Probably worth around $300B
GE, founded 1892, $286B
IBM, founded 1911, $154B
JP Morgan & Morgan Stanley, both descendents of 1854's Peabody, Morgan & co: $300B
Ford, founded 1903, $50B
Woolworths [2], founded 1878, the first department store in the country, once owned the tallest building in the world. Started losing market share to Sears & catalog retailers in the 1930s, defunct in 1997. Sears was itself eclipsed by WalMart, which is on the verge of being eclipsed by Amazon.
International Mercantile Marine [3], owners of the Titanic, once monopolized shipping so thoroughly that the British government paid to keep Cunard (its only competitor) alive. Bankrupt in 1916, sold White Star Lines in 1926 to a company that collapsed in 1934, lost 2/3 of its fleet in the 5 years between 1930-1935, acquired in 1931, divested all passenger vessels by 1968, bankrupt in 1986.
TWA [4], founded via merger in 1930, almost went bankrupt in 1931, dissolved by act of Congress in 1934 but the brand was maintained by one of the daughter companies, purchased by Hughes in 1938, forced (by the government) to be sold in 1966, purchased by Icahn in 1985, bankrupt 1992, bankrupt 1995, final bankruptcy 2001.
There's a pretty massive survivorship bias when looking only at companies you've heard of, and even if they've survived in name for a century, it's not unusual for them to have periodic bankruptcies every 10-20 years that wipe out the shareholders.
[1] https://en.wikipedia.org/wiki/Erie_Railroad
[2] https://en.wikipedia.org/wiki/F._W._Woolworth_Company
[3] https://en.wikipedia.org/wiki/International_Mercantile_Marin....
Even older companies I forgot to include: Citigroup, the NYSE.
My point is not that old juggernauts don't exist, it's that if big companies didn't fail often, they'd be far more commonplace and dominant than they are.
"These types of companies do not dislodge so easily such that they get "eaten for lunch" in the mere span of ten years."
In just three years they'll very likely hit $13 to $15 billion in annual profit or so (it'll be $8.5 to $9 billion in the next 4 quarters alone), and have $50+ billion in cash. What is inbound in the next three years that will hammer down upon a network carrying 1.7 billion users, that is still expanding and has no presently known threat to it, while possessing such extreme financial resources?
Absolutely nothing, that's what. No threat other than perhaps Snapchat could get enough scale in that time to be listed as a potential threat to them in the next three years.
Five years: $70 billion in cash, conservatively. $16 to $20 billion in annual profit, assuming a significant slowdown in their ad growth.
Then from the 5 to 10 year span, what's going to come flying in that is going to steal their $70 to $100 billion in cash? Or make their business disappear in just a few years. I can't name any other example of such a wild outcome happening, outside of maybe AOL, and they never had the financial muscle or scale that Facebook already commands.
That's the problem though. There's a good reason why just about every financial prospectus includes the phrase "Past performance is no guarantee of future results".
Then from the 5 to 10 year span, what's going to come flying in that is going to steal their $70 to $100 billion in cash?
Why are you so confident that you can predict everything that might happen in the next 5 to 10 years?
The conservative, baseline prediction is generally "things tomorrow will be the same as today". Even if you stop their revenue growth (and there doesn't seem any good reason to think that is happening) then the parent's predictions are still basically true.
For the opposite to be true, FB doesn't just need to stop growing, it needs to shrink, and shrink very very quickly.
Can you think of a possible way Facebook could lose all their traffic in that 5 year timespan? All of FB, WhatsApp and Instagram disappearing all at once?
Note that this line of thinking means that you'd never predict the rise of exceptional giants like Google & Facebook in the first place. If your line of thinking can't entertain the creation of these companies, it's unlikely to be any good at predicting their fall either.
Can you think of a possible way Facebook could lose all their traffic in that 5 year timespan?
My point is that since we can't imagine all the possible things that can or will happen in the next 5 years, the fact that we can't think of a possible way Facebook could lose all their traffic becomes meaningless and useless as a reliable source of predictions.
Snapchat's growing revenue streams and social competition for eyeballs. Geo filters are growing quite fast.
Look at GE, or JP Morgan. http://fortune.com/2015/06/10/oldest-companies-fortune-500/
It's just the case that old companies aren't generally coming out of nowhere and all of a sudden turning everything around, part of the reason what apple has done over the past 10 or so years so impressive.
It's plainly absurd to say "a company is big therefore it will grow." In my reading of the original comment I ignored the caveat of the 5-10 year timeframe. It's true that a gigantic company can almost definitely decline for 5-10 years without disappearing. It's not true that that means it will grow for those 5-10 years instead.
With regards to Facebook, when I'm looking over people's shoulders, what are they doing? Checking out their Facebook timeline, or Instagram, (or playing Pokemon Go for the time being). To unseat Facebook, Facebook would need to really betray the public's trust, and a competitor would have to provide an equally comprehensive service (and helpful migration tools). Google Plus's timing was poor and seemed to share everything with the pubic. ello had good timing, but they were invite-based and the minimal interface seemed like it lacked features.
Facebook is the AOL of the present, but unlike AOL they've managed to adapt (or acquire) to users' changing mediums for socializing.
What I said, is that it's the exception for a tech juggernaut to 'get eaten for lunch.' And that is indeed a fact.
Oracle, Microsoft, Intel, HP, Dell, Cisco, Google, Amazon, IBM, Texas Instruments, SAP, EMC, Qualcomm, Samsung, Apple
Where's the lunch eating? Where's the wasteland of destruction of tech titans? Most of those are now old companies, some are very old.
Now name a dozen plus companies of comparable sizes in terms of sales that have actually been destroyed in the last 30 years. It is thus that it's the exception, exactly as I said.
It's easy to accidentally have survivorship bias.
All the companies I listed do not exist now. Some were bought. They were bought because they failed, like Yahoo! Are you going to claim that Yahoo! still exists as part of Verizon?
They did not merge. They were bought for peanuts.
Nokia has 114000 employees (almost twice of 2014 after buying Alcatel-Lucent: Nokia owns Bell Labs now) and $20b+ of revenue.
It's amusing how people in the HN bubble tend to think Nokia was bought by MS and closed.
You are misremembering.
"Digital was acquired in June 1998 by Compaq, in what was at that time the largest merger in the history of the computer industry. At the time, Compaq was focused on the enterprise market and had recently purchased several other large vendors. Digital was a major player overseas where Compaq had less presence. However, Compaq had little idea what to do with its acquisitions, and soon found itself in financial difficulty of its own. The company subsequently merged with Hewlett-Packard (HP) in May 2002. As of 2007 some of Digital's product lines were still produced under the HP name."[1]
The Sun purchase wasn't as big, true. But they had multiple bidders, and sold for $5.6B:
"In late 2008, Sun was approached by IBM to discuss a possible merger.[4] At about the same time, Sun also began discussions with another company, widely rumored but unconfirmed to be Hewlett Packard, about a potential acquisition. By March 2009, talks had stalled between Sun and both IBM and the other potential suitor.
On April 20, 2009, Sun and Oracle Corporation announced that they had entered into a definitive agreement under which Oracle would acquire Sun for $9.50 a share in cash. Net of Sun's cash and debt, this amounted to a $5.6 billion offer from Oracle"[2]
These are both excellent of examples of companies that one might argue "failed" in the market place, but were still valuable years after their peak in the market. That is exactly what adventured is saying.
[1] https://en.wikipedia.org/wiki/Digital_Equipment_Corporation
With no user attrition, I think that prediction is pretty reasonable as their revenue per customer is still quite low with plenty of room to run. But if the fickle consumer starts to migrate elsewhere, as they are wont to do, and FB cannot purchase or build those elsewheres, then those forecasts could be in trouble.
> Nifty Fifty refers to the 50 popular large-cap stocks on the New York Stock Exchange in the 1960s and 1970s that were widely regarded as solid buy and hold growth stocks.
> The long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of these stocks under-performing the broader market averages.
> Because of the under-performance of most of the nifty fifty list, it is often cited as an example of unrealistic investor expectations for growth stocks.
Personally I'm surprised online ad revenue is so high, I rarely click on ads, the fact that enough people do to continue to make it worthwhile for advertisers doesn't really make sense to me. Clearly there are important details I'm missing out on.
It's one possibility. Let's face it, ad networks have done nothing to fight back and adblock itself is really simple software based on rules that block domains and some class names in the DOM.
Also, it's possible to block tracking cookies, making their customer profiles less information rich, which would also make the platforms less attractive to advertisers.
? It's very inconvenient to have your limited content cut by 40%.
Clearly this must be a typo. Advertisers pay more for larger ads. All this mobile ad revenue is based on app installs. And the clicks are often fat fingers on a phone.
Our Google ad salesman keeps pressuring us to spend on mobile. We try to exclude this segment, but we keep getting ads served to mobile devices and clicks. Your comment reminds me that I need to get this sorted out.
Over long time horizons, this tends to reverse itself. (Both companies and markets with unusually high PE ratios underperform low PEs over long time horizons) This is well accepted in finance. [0] [1]
[0] https://www.fidelity.com/learning-center/trading-investing/t...
[1] https://faculty.fuqua.duke.edu/~charvey/Teaching/IntesaBci_2...
For one, ad blocking is on the rise.
Also, we will see more and more native advertising. FB is a good example but your favorite tech quy on Twitter with million followers, your favorite basketball player on Facebook - ever wondered if they get money to tweet or share things? They do... Welcome to native advertising.
It's just nuts..even Microsoft and Cisco in the 90's..the growth was finite, but there is no limit to Facebook, Google and Amazon. Every quarter is a crusher..over and over, year after year.
Just when you think their growth is 'stalled out', something new comes along. Now it's mobile.
The small mobile screen is perfect for advertising. Adsense ads are everywhere. Sometimes major brands try adsense alternatives but always go back because adsense pays the most and has the most advertisers.