Every business pundit has remarked that Facebook’s gazillion-dollar purchase of Instagram earlier this week is the ultimate validation of the Web 2.0 bubble. (Every social media “guru,” of course, sees the buy-out as a signal that we have definitely moved on to Web 3.0 – whatever that is.)
Lairig Marketing believes, however, that the ultimate bubble validation came almost a month ago, with the news that a senior executive left Zynga to join – * drumroll * – Groupon.
“Curtis Lee, director of product management for Zynga, will become Groupon's VP of consumer products…”
On the one hand, this would be confirmation that things must not be looking good at one of the most-awaited IPOs of recent vintage. Indeed, after its pop to near-$16 the day Facebook announced its own IPO filing, ZNGA has – cue Tom Petty – free fallen to $11.50.
With majority-control issues and a secondary offering already, maybe Curtis Lee wrung out all the value of his Zynga stock holdings. Or maybe Zynga is is in trouble, given that Lee’s departure follows that of two other key execs in the past six weeks.
But how could half a story validate a bubble? It can’t. We need to consider why Lee would choose Groupon, of his own free will, as his next employer (this assumes there wasn’t a “daily deal” that day for Groupon’s product manager job opening). After all, there are a billon other game developers he could have gone to.
Groupon is a mess on all levels. Accounting cock-ups that seem to have no end. Another post-IPO lock-up expiration coming in May. Uncertain leadership capabilities (that’s being kind, we know). Pending investor lawsuits.
And, of course, a stock-price history that makes a technical chart analyst drool with pleasure.
So, then, why did Curtis Lee choose Groupon?
There is no logical answer. And that is our bubble validation.
The smartest mental case on earth, Jim Cramer, wrote a prescient piece yesterday. In essence – yes, this is now a bubble…but it is nowhere near a tradable event.
It’s going to be many, many months before ZNGA and GRPN touch zero. Facebook’s IPO will most certainly see a doubling of return in its second day.