I did not balk at Instagram’s $1B acquisition by Facebook nor at Dropbox’ estimated $10B valuation. I believe that both address certain needs. Instagram was widely used in fashion, an industry that most people continue to underestimate. Dropbox, based on experience, is the easiest way to manage files in the cloud and addresses students, teachers, professionals, as well as enterprises. But it seems that recent billion-dollar valuations in the tech space have been based not so much on their business models but rather on how much of an acquisition target they can be.
Looking at Snapchat‘s recent valuation of $10B, I do balk a little. Admittedly, I have not taken advantage of the app’s ephemeral messaging features, which I imagine, are used for drunken messaging and sexting. I don’t necessarily think these features are solving a need so great that people will eventually pay for it. Furthermore, the app’s demographic of teenagers are quite a fickle bunch. However, as an acquisition target, the $10B valuation makes some kind of crazy sense. Kleiner Perkins Caufield & Bryers, the venture capital firm leading Snapchat’s round, must have some really good inside information of how they can profitably exit this one. Google, Apple, Facebook and even Amazon have to fight to stay relevant especially among the elusive millennials. If these companies want to have a pipeline of young users to whom they can eventually sell anything to, then Snapchat and others like it are an expensive but necessary buys.
Read on for this week’s most relevant news in tech and retail:
- After failed talks with Google, Amazon acquires game streaming site, Twitch for $1B
- Apple sends invites for September 9 keynote event, may launch iPhone 6 and iWatch
- Dropbox announces lower pricing, new features and offers 1TB cloud storage for $9.99/month
- Instagram releases new app, Hyperlapse, turning shaky videos into time-lapses
- Fashion wearables: Ralph Lauren with OMsignal launch high-tech biometric shirts at the US Open; Rebecca Minkoff will debut 2 bracelets for charging and notifications at next week’s runway show
- Quarterly reports: Salvatore Ferragamo second quarter reports show higher than expected profit of €90M, up 8% from last year; Tiffany & Co. second quarter earnings are up 7% compared to last year, raises full-year forecast
- Alibaba reports April-June results of 46% increase in year-on-year revenue of $2.54B, fuels the fire of impending IPO; IPO roadshow rumored to start after Labor day
- Dalian Wanda Group enters into a ¥5B e-commerce joint venture with Tencent and Baidu
- Abercrombie & Fitch to remove logos after disappointing second quarter revenues of $891M, a 6% drop from last year
- E-commerce startup JustFab raises $85M at a valuation of $1B