Groupon’s valuation, however, seems to me to be built less on a sustainable revenue model and more on the huge stack of money they’ve managed to raise. The revenue model exists (and it’s a good one) but not to the tune of a $6b valuation.

Facebook, Twitter, Zynga, Groupon – They could all end up being huge for decades. But would it really surprise anyone if most (or all) of them are dead in the next 5 years? I’d be surprised if Facebook didn’t survive, but not THAT surprised. And if that happens, it’d be hard not to call this a bubble.

PATENT FORMALLY GRANTED

Donation system
United States Patent 7870067
Publication Date 1/11/2011

See piece by my friend Nancy Scola and my comment here:

What’s to Actually Like About “Obama’s Online ID”? CDT’s Aaron Brauer-Rieke Explains…

http://techpresident.com/blog-entry/whats-actually-about-obamas-online-id-cdts-aaron-brauer-rieke-explains

Save for the low bandwidth needs of a company called Google. And that launched 2.0 in a more conservative approach. So this is a totally different environment. Broadband is here and more importantly mobile which does an end around the need for hard wires.

Also the legitimization of the internet is in full swing. More and more TV and print ads are for dubious looking companies and products, while internet ads are getting the legitimate companies.

People trust big. So the network effect of Google, Facebook, and Twitter, et al. have helped in “legitimizing” as well as enabling the web for the mainstream.

All looks clear sailing from here, unless bad regulatory and or monetary policies try to throw another monkey wrench into the engine. Which is entirely possible.

But other arguments are out there I’m sure you know.

And I used their button for sign-in because it was easy… and I know it has implications for me as an advertising target which I accept… but there’s no particular ‘loyalty’ involved… and I spend little time actually on the site, play no games and have purchased nothing based on ‘friend’ recommendations.

More than that though

Certain ‘inventions’ will inevitably arise given the development of the landscape that makes them possible. They are emergent properties of the new landscape.

The casual peer-to-peer networking offered by Facebook is one such form.

Like with search before once a certain tipover point is reached concentration becomes self-reinforcing. Alta-vista may have been first in that field… but Google got the prize.

So it is with Facebook post MySpace. A tipover point may have been reached. But I wouldn’t count on it.

Its future may be aborted after achieving wide penetration but only marginal utility. There is nothing other than inertia (all my friends are here)… and a few games I understand are popular with some to keep their numbers up.

Because while Facebook is currently dominant, it doesn’t address the requirements for deep peer-to-peer association.

It doesn’t understand the roots of the peer-to-peer relationship in proximity and capability… in other words it doesn’t really help people DO anything much with others.

Facebook and other such sites are trying to bridge a longstanding gap as ICT quickly goes global.

In evolutionary terms its essentially instantaneous:

There is a FUNDAMENTAL SCALING ISSUE IN HUMAN SOCIETIES associated with NATURAL HUMAN COMMUNITY SIZE (Dunbar’s Number), THE ALTRUISM PROBLEM* (there’s a problematic discontinuity between biological and intellectual altruism) AND COGNITIVE LIMITS (the attention economy).

In short… our personal networks are smaller than the social organism of which we are a part.

I believe the pervasive peer-to-peer network which will achieve dominance will have some particular characteristics…

And that while there will plenty of opportunity for commercial activity… and especially Groupon’s sort of local focus…

The Core of this persistant network both for practical and vital evolutionary reason should be Commons-owned with critical commons focussed functionalities.

This is too long I know… here’s a piece of the pie:

Political Fundraising: Act Blue, Facebook and the Missing Network Imperative
http://culturalengineer.blogspot.com/2010/08/political-fundraising-act-blue-facebook.html

Empowering the Commons: The Dedicated Account (Part I)
http://culturalengineer.blogspot.com/2010/08/empowering-commons-dedicated-account.html

It’s like watching and waiting for a pot to boil. Perhaps the more we talk about it, the sooner it will happen, but I’m dubious. The more someone tells you that something’s perfectly safe, the more you worry that maybe it’s not, and at least as a contrarian, it does raise a red flag (for me).

The other thing is that the truism that too much money chasing too few good deals spoils the party for everyone is a theme that we’ve all learned too well from the last bubble.

It’s the Buffet-ism axiom of market waves moving from Innovators to Imitators to Idiots. All of that makes people reasonably skeptical that this time, this market is different. In fact, the very utterance of such phrases is usually taken as a bearish indicator.

Everyone groks that Facebook is one in a million, but they’ve already priced and funded their IPO…PRIVATELY (DST, Goldman)!

As an investor, LinkedIn, Zynga and Demand Media are all a pretty significant step down qualitatively, and they’re the gold standards in their categories.

Simply put, private money has gotten ahead of the public markets. One or the other will invariably give. It’s just a question of who blinks first.

While not seeing a bursting bubble, don’t you see similarities between then and now that a couple very successful business (albeit at different revenue scales, but PayPal and Groupon and eBay and LinkedIn are decent analogs) lead to many other long shot deals with high valuations deal valuations and funding that are unrealistic long shots.

That’s where I see the similarity between funding now and in 1998/99 … a couple giant great companies are leading to funding many other companies are not nearly as strong.