While mobile applications like Vine and Instagram continue to grow their audiences, a growing number of Silicon Valley insiders are voicing their doubts about the long-term prospects of such firms. Increased valuations have resulted in scepticism from many in the technology industry about the profitability of today’s top mobile firms.
Instagram, the popular image sharing application, was acquired by Facebook for an incredible $1 billion sum less than one year ago. The application’s net revenues are somewhat predictable for those in the Silicon Valley tech industry: a grand total of zero dollars. It’s a deal that many in the industry see as a sign of another bubble.
Silicon Valley is no stranger to valuation bubbles, with the failure of many venture backed technology firms in the late 1990s still fresh in the mind of many investors and industry analysts. With many mobile applications boasting billion dollars net value despite little to no revenues, many fear that a new bubble is forming.
Vine, a mobile application that allows users to create short videos about their lives, has been a major venture capital success. Acquired by Twitter for $30 million at the end of 2012, the company is one of the few relatively low-priced acquisitions in the increasingly inflated world of mobile application valuations.
Snap chat, a mobile application that lets users send short-lasting pictures and video to each other, scored $13.5 million in venture funding earlier this year. It’s currently seeking an additional $100 million to expand its operations. Its revenue model is a predictable story for industry insiders: zero revenue, and zero revenue plans.
The first technology bubble era was defined with little or no revenue going public in an attempt to speed up growth. The IPOs were, of course, failures. The bubble we’re seeing now is much the same, only with a different outcome: instead of failed IPOs, today’s mobile application firms are actively seeking out unprofitable acquisitions.
