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Dot Com Bubble 2.0

written by John Chow on August 26, 2006

Make Money!

The news this week about Sony paying $65 million for video sharing site Grouper brings back many memories from the crazy Dot Com boom days. It seems some of us haven’t learned anything! Grouper has less than 1% of the online video sharing market, is not profitable, and doesn’t know when they will become profitable. As a matter of fact, they don’t know if they will ever become profitable. Yet Sony, in its “We need to buy something Dot Com” wisdom has decided to pay $65 million for the site.

Let’s look at the deal more closely. According to ComScore, Grouper has 542,000 unique visitors in July. That’s not a huge number of visitors. Market leader Youtube has 42 times more market share. If we take the price paid for Grouper and apply it to Youtube, then Youtube would be valued at over $2.7 billion! If this is the kind of valuation companies are putting on un-proven and un-profitable Dot Com’s, I wonder how much they would pay for a site that actually makes money?

Hello Sony? I have a tech site for sale. 600,000 visitors a month and, unlike Grouper, it’s profitable! Yours for just $100 million! Hopefully this Dot Com Bubble 2.0 doesn’t lead to Dot Com Crash 2.0.

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ilker

hey hey.. I've read your blog from the frontpage up to here just to find an article where I can add something valuable to the content: http://ilkeryoldas.blogspot.com/2006/12/web-20-ano...

ps. great blog.. enjoyed it quite a lot (its like my blog writing style too!)

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Lemmy

I used to work for a Microsoft Dynamics Partner - ISV solutions that receieved numerous buy out offers for solutions and services. All of these offers came from companies that felt re-inventing the wheel or developing a similar product was not worth the time and money. Overall, simply aqcuiring technology can be cheaper than developing it.

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John Chow

The technology is hardly anything amazing. There are over 200 other sites that do video sharing. I did a little checking into the management team and I think I have reason for the crazy selling price. Grouper is co-founded by Josh Felser, the co-founder of Spinner.com (sold to AOL). He is a very known quality in the entertainment industy. It's no so much as Sony paid $65 million for Grouper as it was Josh sold Grouper to Sony for $65 million.

Also, about the 542,000 unique, ComScore measures unique differently than webmasters and ads sales people. The 542,000 unique per month is just that - completely unique. This calls for another blog post!

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Matt S.

You are forgetting one thing. Sony didn't buy Grouper for its traffic. Sony could easily pump up the traffic to Grouper with the amount of financial resources they have. They paid $65 million for the technology. Fortune 500 companies, doesn't matter how simple the technology, can't get anything done for cheap because of the corporate policies they have to go through. Therefore, it's easier for them to just acquire technology and be done with it.

Just to let you know John and Jon, just because your sites are getting the same traffic as Grouper and are profitable doesn't mean they will go for millions of dollars. There's nothing to get excited about.

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Jon Waraas

542,000 unique? I have like 2 sites that almost get that much traffic! LOL

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