Internet, innovation and billionaire businesses
by Víctor Alarcón of LATAM Education
The birth of Internet-based companies and technology began in the 1990s with the first global players. Initially, they were called technology-based, ".com" or simply Internet companies.
Almost 30 years have passed and the emergence of new Internet companies has been impressive and unstoppable.
Those companies that reach a value in a short time at 1,000 million dollars or more, are called "unicorn"
The beginning
There are many companies that were born on the Internet and were successful. In a short time, they traded on Nasdaq, the stock exchange preferred by these companies. Their actions were valued quickly, with exponential growth. However, a phenomenon called "technology bubble" or "bubble.com" happened. Not all were successful, in fact, some did not survive.
How is it that the value of your shares increased so much? The answer is very simple, when this type of company grew rapidly, generating a lot of traffic to its portals (such as Google), users interacting in their communities (such as eBay), or sales volume (such as Amazon), it was time to go to publicly trade, launching public offers or "Initial Public Offering", IPO for its acronym in English.
Returning to the theme of the "technology bubble" or "bubble.com", the actions of these Internet companies rose so much in their prices that the market suffered a collapse and a dramatic fall in 2001.
The companies that surpassed this "bump" are still in the market today and are increasingly valued in their "market capitalization" or market cap, that is, the value of the shares multiplied by their number. Later we will see graphs that will illustrate this topic.
Some players and their most popular acquisitions
We have surely quoted or purchased products on Amazon, searched for information on Google daily, or interacted with the eBay offer.
In the market, "new entrants" emerged, new companies with rapid growth and global scaling. Much of them were absorbed by the "big fish" that preceded them. This, many times, is one of the objectives of Startups or business initiatives: to be acquired for an incredibly high figure, the dream of becoming unicorns!
Google bought Youtube for $ 1.6 billion. Amazon acquired Zappos for $ 1.2 billion. But the highest value paid so far in this type of operation is WhatsApp that received 21,000 million dollars from Facebook.
Surely you know and use YouTube and Facebook daily. If you are wondering what Zappos is, it is a portal that sells footwear. They started with a website with pictures of shoes they had taken in physical stores that were charged a commission for the sale of their products.
Zappos's business prospered so much that Jeff Bezos did not hesitate to acquire it by paying $ 1.2 billion, an amount equivalent to the GDP of Granada *, a country in the Caribbean.
The value that Google paid for YouTube, was little more than 1,600 million dollars, this amount is equivalent to the GDP of San Marino *.
What Facebook paid for WhatsApp ($ 21 billion) is much higher than the GDP of Afghanistan * or of Bosnia and Herzegovina *.
The Market Cap today
Let's look at the market valuation (Market Cap) of some companies with renowned brands at the end of Nasdaq last Friday 13. Keep in mind that "B" means billions of dollars:
Google: 859.759BUS$, value per share 1,239.56US$ - Source: Yahoo Finance
Amazon: 909.841B, value per share 1,839.34US$ - Source: Yahoo Finance
Netflix: 128.789B, value per share 294.15US$ - Source: Yahoo Finance
I'm sure you know Netflix, a company that meant a change of time for many generations accustomed to renting or buying Blu-ray movies, before DVD or VHS tapes!
Coincidences
After presenting this evolution and spectacular results, I think there are many things in common in all these business success stories in Digital Business: innovation, technology, different business models and innovative products. However, there has also been a lot of work, seeing things with optimism and pursuing a dream. The dream of the founders of all these businesses, the ones we have quoted and many others.
I have a conclusion for executives, managers and our companies:
We must work very hard, generate new products, pursue our dream and make it possible.
All this despite the obstacles along the way, problems in the market or external factors that will affect us. I would say, overcoming those bubbles that we cannot control.
* Values reported by the World Bank to 2018.
References:
https://datos.bancomundial.org/