Sequoia Capital Looking to Get Out While Facebook Applications Are Still Hot
When I was growing up, I thought people who had lots of money were smart. After all, you can’t be stupid and have lots of money, right? Then I started learn about the world of venture capital in high school and eventually stumbled upon the greater fool theory. It was then I started to realize that just because you have money does not necessarily mean you are smart, it just means that you are probably less of a sucker than the next guy. For those who are unfamiliar with the term, the greater fool theory is the idea of buying something for no other reason than the belief that you will be able to sell it to some other sucker for a higher price. It is a common practice in the venture capital world (especially tech). If you don’t believe me, take a look around at all of the suckers buying over-valued, over-hyped companies everyday.
Who is the Greater Fool That Will Buy RockYou?
RockYou is a great example of the theory of the bigger fool. It is rumored to be up for grabs, with a potential suitor, for $200 to $500 million. The company makes widgets for social networks. It has over 10 million installed widgets on Facebook and over 50 million across a multitude of other platforms. It’s widgets get over 100 million page views per day. But for all of these big numbers, no one really knows exactly what their revenues are or when they will turn a profit. Oh yeah, no one really knows what their business model is either. Not to mention that advertisers have been very hesitant to spend their advertising dollars on social networks and the applications or widgets that inhabit them - RockYou’s number one revenue generator.
In the world of the greater fool, though, none of this matters. Fools buy on promise, hope, hype and the possibility that things will work themselves out eventually and the revenues will start pouring in. RockYou is a ripe acquisition - for a fool - with $200 to $500 million.
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2 comments ↓
Even at .25 CPM (the lower end of medium for social network CPM’s) 100,000,000 page views a day = $25,000 == 9 Million+ per year in revenue. Not exactly a $500MM valuation, but not a bad chunk of change either. And with the success of Facebooks social network API, a niche that is going to grow fast.
The ad formula will be figured out and simplified to the point where Techies/Developers with no marketing sense will be able to cut and paste a solution. Cubix may be failing at it, but trust me, smarter, savvier, prettier, and deeper pocketed people are looking hard at it.
I would pay that price for Rock you personally, but can agree that it is a very valuable thing and would LOVE to be in their shoes.
sorry - I WOULD NOT pay that price personally - I hope that isn’t a legally binding typo….
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