Nov 11, 2013

The Google Bubble: Why Silicon Valley’s Ad-Supported Business Model Is Bound to Crash

These days it’s hard not to get excited about the promise land that is Silicon Valley. The likes of Google and Facebook with their soaring stock prices, profits and media coverage seem like unstoppable empires. Even Twitter with no profits or positive balance sheets to speak of had a very successful and strong IPO. Wall Street is happy!  The uncomfortable truth, however; is that these tech empires of Silicon Valley are hollow beyond the hype they generate. 
Ozytive.com
It should be a disturbing trend and indicator for the economy that some of the most celebrated and Wall Street favored companies have only one source of profits: Advertising. But of course the stockmarket runs on hype, the one commodity that Silicon Valley actually manufactures [domestically]. Just like hype not reality drove up the housing prices in early 2006 before the bubble burst, hype is currently behind the stock prices of the likes of Google and Facebook. We are in the Google bubble now and all we can do is hope and wish that Silicon Valley’s coming crash does not cost taxpayers as much as it cost to bail out Wall Street back in 2008.

The sobering truth that the Ad-Supported cartel of tech giants have to eventually face is that at some point the 24/7 advertising bombarded consumer market will reach a saturation point and more clicks or views will have very little value. And what happens when hype moves to a new industry and the talent follows? The future of Google will look more like Microsoft or even BlackBerry if it does not evolve its R&D focus from maximizing Ad-Revenues and eroding consumers’ privacy.

Unfortunately for society, Google’s future vision is a typical Silicon Valley misguided mindset where algorithms and apps can save us from all the evils of inefficiency and lead us to a perfect “technopia” in exchange for our privacy, attention spans and consumption history. It is only ironic that Silicon Valley has one of the biggest homelessness and inequality problems only a few miles from Mountain View. Peter Thiel best articulated the dominance of hype in tech over real innovation when he famously said, we had wished for flying cars by now and we got 140 characters referring to Twitter. And now the same 140 characters technology is worth billions of dollars strictly based on hype and speculation.

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