Google, Groupon and calling Technology Bubbles

This morning we learn that Google is apparently going to pay $6 billion for an online coupon company, Groupon (or is it $5.3bn - there is a $0.7bn earnout, not clear if its part of the $5.3bn or not). In the Real World, these are basically shoe-leather sweatware businesses and typically trade at about 1x revenue or thereabouts, but this is a 10x price at least (Groupon "self reports" monthly revenues of $50m, and I'm betting that it's not being conservative).

There is very iittle to suggest that moving the coupon medium from paper to digital changes the basic cost structure of such a business, nor is it clear that Google's software algorithm based business model has any real synergies with what is in essence a (never mind whether Google has the culture to run this sort of business) wetware salesforce based model. (As late as June this year it had a $1.35 bn valuation on expected $500m revenues, now its apparently c $5-6bn on $600m revenues.....go figure)

This follows on the heels of the "re-valuation" of Facebook from c $30m in September to c $50bn now - apparently after Mary Meeker used the Web 2.0 stage in November to predict the social media/mobile internet market was waaaay bigger than any other (clearly dumb) forecasters were prepared to argue for. But Mary, you may recall, has prior form in this space - do the words "dotcom" and "bubble" ring a bell?

As an aside, what does this tell you about The Google Of Today?

As Fred Wilson pointed out yesterday, there is a large (and increasing) amount of "dumb money" flowing into the space, which is the required precursor to a bubble.

So there you have it - a heady cocktail of dumb money, analytical optimists, desperate Olde Web companies paying over the odds and a bunch of investors desperate to cash out (VC-dom has had a torrid time of late, and the real truth is that the exit market is still languishing). All we now need is a concerted effort to rev up the PR press to hype this all to the nines (hooray - between Dotcom 1.0 and today we have invented the blogosphere-for-rent ) and we are done. As I wrote on Fred Wilson's blog yesterday, we now need to look for the tell tale bubble signs:

Well, firstly we now have to manufacture more entrepreneurs, so I can predict the rise of:

- "The Entrepereneur as Social Hero" narratives, and the Worship of the Startup, fueled by New First Tuesdays, Wednesdays and whatever other days one can get.

- More Incubators, churning out more copycat businesses for these investors to buy

- More Entrepreneur Porn for PR puff to do its thing - all those dotcom magazines, websites, etc. When Red Herring is re-founded you know the thing is flying.

Secondly, we need to manufacture more types of businesses to be invested in, as the small subset of sensible ones plus their 10 clones are not enough, so expect a new round of opportunities to invest in hard-to-work-out-what-they-do companies "for carrying out an undertaking of great advantage, but nobody to know what it is"

Thirdly, new market research has to show that the market is waaaay bigger than any fusty old last-years-analysts thought, and in fact these new technologies open a new economic paradigm.

I await the New Economic Paradigm with bated breath. It will be along the lines that social media is Truly Different, and that Local, Mobile will change the way the world works.

Oh wait.....