Feeds:
Posts
Comments

Posts Tagged ‘Amazon’

Here’s why I like Google’s speakers better than the Amazon Echo

google home mini The Google Home Mini in a Google-exclusive “coral red” color. Matt Weinberger/Business Insider

  • This holiday season, Google Home and Amazon Echo will be very popular gifts, with both companies releasing new products in the line.
  • Amazon Echo is great for Amazon fans, with a wide range of hardware and some nifty software.
  • But Google Home is better for most people — Google’s AI and ability to answer even weird questions makes all the difference.

This holiday season, the escalating war between Google and Amazon is coming to a store shelf near you.

Amazon will be pushing its revitalized line of Echo smart speakers, powered by the Alexa voice agent. That includes the ever-popular Echo Dot, now $40, a revamped $99 Echo, the $129 Echo Spot alarm clock, and more Alexa-powered gadgetry, besides.

In the other corner is Google, which is hyping up the $50 Google Home Mini, powered by its own Google Assistant. Also on offer: The original $129 Google Home, and, come December, the $400 block-rocking Google Home Max.

There are other options, sure. The Harman Kardon Invoke is powered by the Microsoft Cortana agent, for instance, while Apple’s Siri-powered HomePod will likely be on store shelves before Christmas.

But I’m here to make the case that it’s Google, and the Google Assistant, that reigns supreme. There are all kinds of little reasons I believe this, but there’s really one big one: Google Assistant is much smarter than Alexa, Siri, or pretty much anything else on the market today.

Here’s the skinny.

Amazon Alexa is good…

At the most basic level, Amazon Echo and Google Home can do most of the same things. You can set alarms and timers, play music, check your calendar, add items to your shopping list, get the weather, make phone calls, and control your smart-home gear.

Both products also carry some corporate synergies. With an Amazon Echo, you can shop on Amazon, control a Fire TV streaming box and listen to Amazon Prime Music; with a Google Home, you can control Chromecast streaming devices, access Google Play Music, and shop with Google partners like Target and Walmart. It’s a matter of taste.

amazon echo spot Checking your calendar with the Amazon Echo Spot Matt Weinberger/Business Insider

Amazon Alexa has been around for a little longer, and it shows in a few areas: Alexa supports a slightly wider range of smart home appliances, and sports nifty Echo-to-Echo voice and text messaging features. Plus, Amazon keeps releasing new and innovative Echo devices to showcase what Alexa can do. Google Assistant is adding new features to catch up all the time, Amazon has been relentless about improving Alexa.

Okay, so if the two devices are the same in so many ways, why do I like the Google Home better? Well, to answer that, I’m going to have to take a big step back and explain why I like the Google Assistant better than Amazon Alexa.

…but Google is smarter

Because it taps straight into Google’s base of knowledge, both global and personal, Google Assistant can answer lots of questions, even the really obscure ones. “OK Google, what day was the Battle of Hogwarts?”

Here’s a great example of how that translates into a more usable device. If you ask Amazon Alexa if your dog can eat tomatoes (or carrots, or cereal), it gives you a canned response with all sorts of things dogs shouldn’t eat. Ask Google Home if your dog can eat something, and it usually gives you a yes/no answer, with its source cited.

In general, the Amazon Echo can answer some basic questions (“When do the Yankees play next?”). But, despite Amazon’s efforts  to smarten Alexa up over the years, it tends to stumble over anything more complicated (“How do I get rid of a depleted fire extinguisher?”)

google home The $129 Google Home speaker. Hollis Johnson/Business Insider

If you ask a question Alexa doesn’t know, it nudges you towards “skills” that extend its knowledge and functionality — skills for recipes, for games, and trivia, and relaxation. Not every Alexa skill is great, though, and frankly, I don’t always remember which skill I need when I’m just trying to figure out a question.

And that smarts manifests itself in other ways, too. This goes back to those corporate synergies, but it’s nice to be able to say “OK Google, display my engagement photos on the bedroom TV,” and have it grab the relevant imagery from the Google Photos service, and use the Chromecast to put them up on the correct screen.

So, yeah, it’s a matter of taste, especially as more and more smart speakers come online. But in the battle between Amazon and Google, the artificial smarts really make all the difference.

Advertisements

Read Full Post »

Should you be scared of Amazon?

jeff bezosAmazon CEO Jeff Bezos. Amazon bought Whole Foods on Friday for $13.7 billion.REUTERS/Abhishek N. Chinnappa
AMZN Amazon.Com

About a month ago, New York Times columnist Farhad Manjoo helped coin a new term for the top-five tech companies that are increasingly dominating our lives: The Frightful Five, better known as Apple, Google, Microsoft, Amazon, and Facebook.

The top of his list? Amazon.

Farhad’s argument was that he’s increasingly dependent on Amazon for buying stuff and entertaining his family. That’s true.

But I’d argue Amazon’s reach goes deeper than that, deeper than any other company inside or outside the tech world. And its grip on our lives is only getting stronger, which raises some serious questions we haven’t had to ask ourselves about the power and influence a tech company can have over our lives.

Out of the Frightful Five, Amazon is the company you should fear the most.

Amazon’s surprise $13.7 billion acquisition of Whole Foods is the latest example. We already knew Amazon had ambitions to break into the grocery business through the Amazon Fresh delivery service and the futuristic cashier-free convenience stores, but this is a whole other level — a subtle troll that the online retail giant can creep its way back into the physical world and take over a popular chain of supermarkets.

But let’s talk about everything else Amazon has its grip on and how it continues to hold greater influence over:

  • Cloud computing. Amazon Web Services powers many of the apps and websites you use every day. (Remember when an Amazon outage took down a large chunk of the internet?)
  • Artificial intelligence. Amazon has quickly become a leader in AI thanks to its Alexa assistant, which has opened up a new world of voice-powered computing.
  • Logistics. Through Amazon Air, Amazon plans to use drones and its own planes to deliver goods. It’s also experimenting with autonmous trucking. Many have speculated that one day Amazon won’t need to rely on UPS, FedEX, or the Postal Service to deliver stuff.
  • Entertainment. Amazon has dumped millions into original TV programming and movies. It also runs a streaming music service, and lets you buy digital music and video.
  • Food. Between Whole Foods, those futuristic grocery stores, and the Fresh delivery service, Amazon is poised to be one of the largest grocers in the country.
  • Health. According to a CNBC report, Amazon is thinking about getting it the prescription drug business.
  • Retail and e-commerce. This one is self-explanatory.

There’s more. Amazon’s influence extends to other industries indirectly through CEO Jeff Bezos’ personal investments:

  • News media. Bezos owns The Washington Post and a small percentage of Business Insider.
  • Outer space. Bezos owns a rocket company, Blue Origin, that’s building reusable rockets.

That’s a lot of stuff that affects you every day from a company that started selling books online back in the 90s. Now it’s hard to find a need Amazon can’t fill.

That raises some serious, potentially scary questions if Amazon’s influence and capabilities continue to grow. Should one conglomerate have that level of control over the future of so many vital industries people rely on? What kind of check will there be on that power, if any?

Granted, it’s a little early to be thinking about all this. Most of the verticals Amazon is involved in are still dominated by traditional companies. But as we saw in the market’s reaction to the Whole Foods deal on Friday, it’s clear that there’s a strong possibility we’re accelerating toward a future where there’s a digital layer on top of everything we do. And the company best equipped to deliver all is Amazon. There’s literally no one else in a position to compete.

That’s a lot of power concentrated in one conglomerate, and puts Amazon in a position where it’s a company to fear.

Read Full Post »

Amazon is eating away at Google’s core business

jeff bezos amazon ceo happy laughing smilingJeff Bezos, the founder and CEO of Amazon.Alex Wong/Getty Images

Current Prices

For more and more people, Amazon is the first port of call when it comes to researching potential purchases — and that’s bad news for Google.

Over half of Americans now go to Amazon to carry out their first search for products, turning away from search engines and other online retailers, according to a new study from the marketing company BloomReach. (The research was previously reported on by Bloomberg.)

Fifty-five percent of those surveyed made their first search on Amazon, up from 44% a year ago. At the same time, just 27% of people began at search engines, down from 34%. Retailers also saw a decline, dropping to 16% from 21%.

(The study took place on Labor Day, May 1, and surveyed 2,000 US consumers. There’s no word on data from other countries, but it seems reasonable to assume that the data might be similar in Western markets where Amazon has a similar presence as in the US.)

It’s a yet another sign of how fully Amazon is dominating online shopping — but it’s also particularly bad news for Google.

Google’s original, core business is a search engine. But more and more consumers are now opting to bypass it in favor of heading straight to the ultimate destination.

A customer pushes her shopping cart through the aisles at a Walmart store in the Porter Ranch section of Los Angeles November 26, 2013. REUTERS/Kevork Djansezian Shopping IRL is so passé.Thomson Reuters

The ads Google can serve next to product or shopping searches are especially lucrative (as they can be highly targeted at users clearly intending to spend money), making this trend more damaging than if Google’s search market were eroding in a different sector (educational searches, for example).

A Google representative declined to comment.

There’s still no guarantee, however, that people who visit Amazon first will definitely buy from there — something BloomReach acknowledges. “Just because consumers start on Amazon, that doesn’t mean they ultimately buy from Amazon,” marketing head Jason Seeba said in a statement. “Instead, they’re often comparing and researching products on search engines and other retailers.”

Plus, it’s not as if Google is dependent solely on search: Its revenue now comes from everything from its DoubleClick ad network to its Google Play purchases.

But even so, Amazon has become the unrivalled go-to destination to start Americans’ search for products — and that has to worry the world’s largest search engine.

Read Full Post »

Amazon is doubling down on retail stores with plans to have up to 100 pop-up stores in US shopping malls

jeff bezosDavid Ryder/Getty Images
Amazon.Com $760.14

Amazon is aggressively expanding its presence in the real-world retail market, with a plan to open dozens of new pop-up stores in US shopping malls over the next year, a source familiar with the matter told Business Insider.

The miniature retail storefronts are a separate effort from the physical bookstore that Amazon opened in Seattle last year and are primarily designed to showcase and sell the company’s hardware devices, particularly its Echo home speakers.

The pop-up stores, which are spearheaded by Amazon’s head of devices and services, reflect the company’s growing drive to reach consumers directly through a variety of access points including retail storefronts, home delivery, and innovative devices.

Just as Apple changed its relationship with customers through its sleek retail stores, Amazon is building out its vision for a new class retail business that weaves together a powerful assortment of online and physical components.

Pop-up stores, typically 300- to 500-square-foot locations in the middle of shopping malls, carry an assortment of Amazon hardware — including the Kindle e-readers, Fire TV, and the Echo speakers — as well as accessories. But the broader goal is to drive more traffic to Amazon’s online store, as these devices make it easier to purchase items there.

As of August, Amazon had 16 pop-up stores in the US — nearly three times as many as the six it had at the end of last year, according to the source. That number is expected to exceed 30 this year and could go up to as many as 100 by next year, as new stores are popping up almost every week in shopping malls across the country, this person said.

In fact, Amazon quietly launched a new site dedicated to its pop-up stores; it shows 21 now. The stores are spread across 12 states, including New York and Texas, with California owning the most (six).

End of the test phase

Amazon is hiring a number of positions for “Amazon device pop-up stores” in multiple locations that have yet to be announced, including Miami, Florida, and West Hartford, Connecticut, according to job listings.

In one of the job posts, Amazon says pop-up stores “have emerged from the test phase with a goal to expand and grow.”

Business Insider’s source said Amazon seems to be putting a lot more resources in its pop-up store expansion and that it could potentially evolve into other forms as well, such as a brick-and-mortar space similar to an Apple Store. Amazon has tested things like pop-up trucks, but those haven’t really materialized into any meaningful sales channels.

Amazon pop up storeThe Amazon pop-up store in San Francisco’s Westfield Mall.Business Insider/Eugene Kim

Amazon never officially announced pop-up store launches, although it did confirm the 2014 opening of its San Francisco one in the upscale Westfield Mall. And The Wall Street Journal’s Greg Bensinger discovered a smaller pop-up store in the mall a year before that.

Amazon still hasn’t closed its Westfield Mall location, despite the short-term nature of pop-up stores.

The pop-up stores come with hefty fixed costs, including leases in shopping malls and full-time employees to staff the storefronts. But they offer a new way for the company to boost its brand awareness and to drive sales, both at the stores and on its website.

Given Amazon’s obsession with data, the decision to expand the network of stores may indicate that the company has seen an uptick in online sales in the regions where it already has pop-up stores.

The pop-ups also serve a strategic purpose by providing Amazon with its own physical sales channel — something that has become especially important after big-box retailers such as Target and Walmart stopped selling Amazon devices in 2012. (Target plans to bring Amazon products back this year.)

Amazon declined to comment on its roadmap for the stores but provided this statement: “We offer pop-up kiosks so that customers can try out all our new devices and learn about our services like Prime and unique content like Amazon Originals.”

The Echo effect

Amazon SVP of Device Dave LimpAmazon SVP of Device Dave Limp showcasing the Echo.AP/Jeff Chiu

One interesting part about Amazon’s pop-up stores is that they’re run by the devices team, not the retail team that opened Amazon’s bookstore last year. The initiative is led by Senior Vice President of Devices and Services Dave Limp, who oversees everything from the Kindle to the Echo.

That means the push for more pop-up stores coincides with the success of the Echo, which is widely considered to be the next big hit product for Amazon. The Echo’s success has prompted rivals such as Google and, reportedly, Apple to develop competing versions.

According to multiple sources, Amazon is increasingly putting more resources to developing the Echo and its voice technology platform, Alexa — and the pop-up stores provide an important way to raise brand awareness for both products.

Another source said Amazon played with the pop-up store concept while the Echo was being developed in 2013, as it’s a way to let people play, hands-on, with its devices, especially the unusual ones like the Echo.

“Lowering the barriers to trial and letting people feel how things actually work is a great way to start,” this person said.

It’s unclear why Amazon’s taking such a low-key approach to its pop-up store expansion. But it’s not too uncommon for Amazon to do things quietly when it’s clear that it has bigger ambitions. Amazon’s fashion team, for example, launched seven private labels over the past year — and it’s expected to overtake Macy’s as the top apparel retailer in the US by 2017.

Read Full Post »

Amazon Might Start Testing Its Delivery Drones In India, Since It Can’t In The US

amazon drones

Amazon

Amazon will reportedly start testing its delivery drones in India as soon as October, sources tell The Economic Times of India.Amazon CEO Jeff Bezos first announced the company’s drone delivery ambitions back in December 2013, which would let customers receive packages in as little as 30 minutes.

The company hit roadblocks in its initial testing because commercial drone use is currently illegal in the US. The Federal Aviation Administration (FAA) currently dictates that only hobbyists can fly drones outdoors, while all commercial experimentation needs to take place indoors. (The FAA was originally expected to lift its ban on commercial drones starting in September 2015, but The Washington Post says “technical and regulatory obstacles” will delay that deadline.)

To avoid these domestic regulatory constraints, Amazon will reportedly start drone trials in India, which doesn’t have any laws about drone usage. The Economic Times pinpointed two Indian cities, Mumbai and Bangalore, where Amazon already has warehouses.

The testing would likely bring big publicity to Amazon in India, where the company is currently battling it out with Flipkart, an e-commerce company that recently raised $1 billion. The next day, Bezos announced that Amazon would invest $2 billion in its Indian operations.

Amazon told The Economic Times that it wouldn’t comment on the rumors.

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

Read Full Post »

Unknown

Dear Friends, – by Brad Powers, Founder & CEO

April has been a tremendous month for Cupcake Digital Inc. and I’m extremely excited to share our exciting progress you.

App News:

April has not only been our strongest month for App production, but we continue to achieve top ranking positions for our releases on major distribution platforms.

In fact, yesterday Wubbzy’s Dance Party, an App released only this past Tuesday (4/23), achieved the “#1 Paid App” ranking for iPad in Apple iTunes books in just three days.

jpeg

Other April Releases Include:

pngApril 4: Wubbzy’s Magic School

In this feature-rich, deluxe storybook app, Wubbzy’s Magic School! After a day at Moo Moo the Magician’s Castle, the friends learn that magic really does happen when you believe in yourself and try your hardest.

png-1

April 11: Wubbzy’s Space Adventure / Wubbzy en una Aventura Espacial

This is a very special release since it is our offering to include both an English and Spanish version within the same App.  Kids, parents, and caregivers now have the choice of language with which to listen to the narration or read the story themselves.

This initiative not only increases the addressable market for our Apps, but also expands our marketing capabilities.

We are currently working on adding a Spanish version to a series of English-only Apps in our existing library across all distribution channels.

jpeg
April 16: Animal Planet’s Hide and Seek Pets

Wubbzy’s Dance Party, an App released only this past Tuesday (4/23), achieved the “#1 Paid App” ranking for iPad in Apple iTunes books in just three days.

jpeg-1

This is our first App for Animal Planet marking the first property expansion for our library beyond Wow, Wow, Wubbzy.

We are extremely excited about both the sales generated and the reviews we have been getting.  Premium priced at $3.99, this App has already already reached the “#3 position” within HOT New Education Section on Amazon.

jpeg

Apr 25: Wubbzy’s Animal Coloring Book

png

This marks the debut of our new coloring engine.  It will not only allow us to create “stand alone” coloring and activity books for all our properties, but it will also be integrated into all of our new Apps.
Looking Ahead:

Early May: Fraggle Rock “Fraggle Friends Forever”

This release will expand our App library to three active licensed properties.

As part of the preparations for its release, I have just returned from the 30th Anniversary Celebration for Jim Henson’s Fraggle Rock in Los Angeles.  We have provided sneak peeks to several national media outlets. The feedback has been fantastic.

The App launch in early May will be supported by a significant media campaign in collaboration with the Henson organization.

In June: Strawberry Shortcake

We look forward to our first App release for American Greeting’s Strawberry Shortcake in June with great anticipation.

Strawberry Shortcake is an iconic children’s property and we are proud to be their licensed partner. This will be the fourth active licensed property in our growing App library.

Like all our properties, the launch of the Strawberry Shortcake App will be supported by a robust marketing campaign to increase sales rapidly.

Properties & Licensing Pipeline

We continue to make great progress in our property acquisition initiatives.  We are currently in the final stages of negotiation with several “A+” properties and will be making announcements about them shortly.

Continued Accolades for Cupcake Digital Apps

In addition to increased sales, the positive accolades for our Apps continue to keep pouring in.

We have received a tremendous amount of press with the release of our first dual language App, Wubbzy’s Space Adventure/ Wubbzy en una Aventura Espacial, both in online and traditional press.

We also continue to win awards from Famigo (a site that provides recommendations for kid-safe apps and content) and Appysmarts (a resource that helps parents choose the best apps for their kids).

For a full list of our reviews and awards please visit: http://www.cupcakedigital.com/testimonials/

Distribution Partnerships

One of the key stones of our marketing strategy is building strong relationships with our distribution partners.

Recent results of those relationships include:

1.  iTunes featuring Animal Planet Hide and Seek Pets and Wubbzy’s Dance Party in their New and Noteworthy section.

2.  iTunes also selected Wubbzy’s Pirate Treasure as a feature in a special “Apps for Preschool & Kindergarten” selection.

3.  Amazon also continue to feature Cupcake Digital Inc. Apps throughout their App store. Barnes & Noble is currently planning several “curated” mailings and site positions especially for us.

4.  New Position Paper Regarding Parental Guidelines for Children’s Apps

We are delighted to have recently published a new white paper based on an interview with Dr. Natascha Crandall, PH.D.  Dr. Crandall is a psychologist and educator with a special interest in enhancing children’s growth and development through the power of media. This paper explores Dr. Crandall’s findings on App use by children while also establishing a framework for the continuous improvement of our own Apps.

As part of the white paper we also included parent and caregiver guidelines for using Apps as a supplement to children’s learning.

To read the complete position paper, please visit:

http://www.cupcakedigital.com/blog/new-white-paper-features-dr-natachsa-crandall-on-apps-for-children/

Make Your Opinion Count: Download & Review a Cupcake App Today!

As always, if you have not already done so, please visit http://www.cupcakedigital.com/apps/ and click on the store icon of your choice (iTunes, Amazon, Google Play or Nook) to download our Apps on any mobile phone or tablet device.

Give it a test drive and make sure to write a review!

Encourage your friends, family and loved ones to do the same. Help us create a bigger viral buzz about the quality of our products.

Thank you for your on-going support! I will continue to update you on a regular basis.

In the meantime, please feel free to contact me anytime with questions or comments.

Sincerely,

Brad Powers

Chairman

Read Full Post »

Article from NYTimes.

Facebook shares will be tempting to buy when they start trading on Friday. The company has hefty profit margins, a household name and a shot at becoming the primary gateway to the Internet for much of the planet.

But if history offers any lesson, average investors face steep odds if they hope to make big money in a much-hyped stock like Facebook.

Sure, Facebook could be the next Google, whose shares now trade at more than six times their offering price. But it could also suffer the fate of Zynga, Groupon, Pandora and a host of other start-ups that came out of the gate strong, then quickly fell back.

Even after Facebook supersized its offering with plans to dole out more shares to the public, most retail investors will have a hard time getting shares in the social networking company at a reasonable price in its first days of trading.

Facebook’s I.P.O. values the company at more than $104 billion. And the mania surrounding the offering means Facebook shares will almost certainly rise on the first day of trading on Friday, the so-called one-day pop that is common for Internet offerings. At either level, Facebook’s price is likely to assume a growth rate that few companies have managed to sustain.

New investors, in part, are buying their shares from current owners who are taking some of their money off the table, a sign that the easy profits may have been made. Goldman Sachs, the PayPal co-founder Peter Thiel, and the venture capital firms DST Global and Accel Partners are all selling shares in the offering.

“It is a popular company, but it is still a highly speculative stock,” said Paul Brigandi, a senior vice president with the fund manager Direxion. “Outside investors should be cautious. It doesn’t fit into everyone’s risk profile.”

For the farsighted and deep-pocketed investors who got in early, Facebook is turning out to be a blockbuster. But by the time the first shares are publicly traded, new investors will be starting at a significant disadvantage.

Following the traditional Wall Street model, Facebook shares were parceled out to a select group of investors at an offering run by the company’s bankers on Thursday evening, priced at $38 a share. But public trading will begin with an auction on the Nasdaq exchange on Friday morning that is likely to push the stock far above beyond the initial offering price.

That is what happened to Groupon last fall. Shares of the daily deals site started trading at $28, above its offering price of $20. It eventually closed the day at $26.11.

The one-day pop is common phenomenon. Over the last year, newly public technology stocks, on average, have jumped 26 percent in their first day of trading, according to data collected by Jay R. Ritter, a professor of finance and an I.P.O. expert at the University of Florida.

In many of the hottest technology stocks, the rise has been more dramatic. LinkedIn, another social networking site, surged 109 percent on its first day in May 2011, and analysts say it is not hard to imagine a similar outcome with Facebook, given the enormous interest.

Unfortunately for investors, the first-day frenzy is not often sustained. In the technology bubble of the late 1990s, dozens of companies, Pets.com and Webvan among them, soared before crashing down.

At the height of the bubble in 2000, the average technology stock rose 87 percent on its first day. Three years later, those stocks were down 59 percent from their first-day closing prices and 38 percent from their offering prices, according to Professor Ritter’s data.

The more recent crop of technology start-ups has not been much more successful in maintaining the early excitement. A Morningstar analysis of the seven most prominent technology I.P.O.’s of the last year showed that after their stock prices jumped an average of 47 percent on the first day of trading, they were down 11 percent from their offering prices a month later. Groupon is now down about 40 percent from its I.P.O. price.

“It’s usually best to wait a few weeks to let the excitement wear off,” said James Krapfel, an I.P.O. analyst at Morningstar who conducted the analysis. “Buying in the first day is not generally a good strategy for making money.”

There are, of course, a number of major exceptions to this larger trend that would seem to provide hope for Facebook. Google, for instance, started rising on its first day and almost never looked back.

Even among the success stories, though, investors often have had to go through roller coaster rides on their way up. Amazon, for instance, surged when it went public in 1997 at $18 a share. But the stock soon sputtered, and it did not reach its early highs again until over a decade later. The shares now trade near $225.

More recently, LinkedIn has been trading about 140 percent above its offering price of $45, enough to provide positive returns even for investors who bought in the initial euphoria. But those investors had to sweat out months when LinkedIn stock was significantly down.

Apple is perhaps the clearest example of the patience that can be required to cash in on technology stocks. Nearly two decades after its I.P.O. in 1980, it was still occasionally trading below its first-day closing price, and it was only in the middle of the last decade — when the company began revolutionizing the music business — that it began its swift climb toward $600.

Facebook’s prospects will ultimately depend on the company’s ability to fulfill its early promise. It has a leg up on the start-ups of the late 1990s, which had no profits and dubious business models. Last year, in the seventh year since its founding, Facebook posted $3.7 billion in revenue and $1 billion in profit.

But investors buying the stock even at the offering price are assuming enormous future growth. While stock investors are generally willing to pay about $14 for every dollar of profit from the average company in the Standard & Poor’s 500 index, people buying Facebook at the estimate I.P.O. price are paying about $100 for each dollar of profit it made in the past year.

When Google went public in 2004, investors paid a bigger premium, about $120 for each dollar of earnings. But the search company at the time was growing both its sales and profits at a faster pace than Facebook is currently.

Facebook may be able to justify those valuations if it can keep expanding its profit at the pace it did last year, a feat some analysts have said is possible. But especially after the company recently revealed that its growth rate had slowed significantly in the first quarter, the number of doubters is growing.

“Facebook, by just about any measure, is a great company,” Professor Ritter said. “That doesn’t mean that Facebook will be a great investment.”

Read more here.

Read Full Post »

Older Posts »