Drewbot • A Few Bad Apples

A Few Bad Apples

If you think the collapse of Groupon’s stock price signals the bursting of the tech bubble, I suggest you pull all your assets out of tech investments now.

Because you don’t understand ‘tech’ in the least.

Using Demand Media and Groupon as barometers for the technology industry is idiotic.

There’s no other way to put it.

It the near equivalent of declaring the energy industry bust because of Enron’s implosion. Rotten companies do not signal a rotten industry.

Demand Media uses shifty accounting to cover its issues, which relate to it being a Ponzi-esque scheme built atop search marketing (using search trends to spit out mass-produced content to game search trends to sell search ads).

The lead up to Groupon’s IPO featured similarly shifty reports. The company used an financial metric which would calculate profits while omitting online marketing expenses and other costs related to adding new users (aka Groupon’s core growth cost).

Both companies plummeted because they were overvalued and deserved to drop, not because their industry is bursting.