Several companies that were supposed to be the foundation of a new Internet era plummeted this week as analysts and investors downgraded their dreams. There were instant echoes of the crash of 2000, when the money stopped flowing, the dot-coms crumbled and Silicon Valley devolved into recriminations and lawsuits.
Shares of Facebook stumbled to a new low Friday after its first earnings report revealed a murky path to any profit that would justify its lofty valuation. The heavily promoted $100 billion company on the eve of its May debut is now a $65 billion company and persistently headed south.
Zynga, the social games company that uses Facebook as a platform, was battered even worse on Thursday, leaving its value at less than a quarter of its peak last winter. Netflix, which is trying to move from physical discs to streaming video, and the coupon company Groupon have also been under severe pressure, leaving them at a fraction of their recent worth.
…The issues facing each tumbling company are slightly different. But they all have the problem of selling something — imaginary tractors, Internet films, discount deals or, in Facebook’s case, someone “liking” a product — that is not quite real and perhaps less than essential.
“The gleam has come off the word ‘social,’ ” said Ben Schachter, an Internet analyst with the Macquarie Group. “The ground is now shifting underneath these companies’ feet at a speed that we didn’t see even in the late 1990s.””
And the “echo of 2000” sounds like the theme to Jaws.