Uber and Netflix could be running out of time as the tide turns on big technology firms.
Uber's share price has lost a quarter of its value in the last two months as investors reassess the value of a company that has lost US$5 billion ($7.9b) over the past three months alone.
Netflix shares have also fallen sharply in the last three months, down from US$381 to US$265, as people begin to ask, 'Hey, aren't businesses supposed to make more money than they spend?'
The increasingly wobbly future of these two well-known tech titans is something for us all to worry about as consumers. No more cheap rides and no more Stranger Things? Who'd want to live in that kind of future! But it's also an issue for the global economy.
These internet firms have put a lot of competitors out of business because they seemed to hold promise as the big companies of the future. But if all they have been is transient visitors to our lives, alive as long as investor money lasted and thereafter gone, then the future looks rather more grim.
The turning tide
A shift in investor sentiment against big loss-making firms has hardened in the last week. A big US company called WeWork had been getting a lot of headlines and preparing to float itself on public markets in the US. There was a lot of hype around this start-up, and people were saying it could be worth as much as US$47b.
WeWork managed to convince people it was a technology company, even though in practical terms it is more of a real estate company. The company made a lot of fuss about using lasers to measure the size of their office spaces.
WeWork does office leasing. They rent out space to people and companies to work in. Sure, they have some technology in their business, but so does Bunnings. WeWork was not Amazon or Google, not by a longshot. And in recent days it has been on the end of a major backlash that has resulted in its valuation being talked down to US$20b, and then even below that, to the point it has now decided not to float on the public markets.
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WeWork has been described as "the triumph of hype". And now that hype is dying down, people are starting to look around and wonder if perhaps any other US companies have been affected by hype. Uber is in the firing line, with major Silicon Valley investor Larry Ellison saying it is "almost worthless".
Growth at all costs
For its part, Uber insists everything is fine, and the business is still growing.
"The model is absolutely sustainable," said chief executive Dara Khosrowshahi. "The business, for example, is still growing 30-plus per cent on a global basis."
And there's the magic word. Growing. This is why a loss-making company can get so highly valued. People are happy to own losses now in the hope they will own a titan of the future economy.
Netflix boss Reed Hastings explained his company the same way in talking to investors earlier this year ("net adds" refers to net new customers won).
"We still think our net adds this year will be larger than last year. We'll keep pushing on that. And what we want to do is just grow the net adds every year and then the future takes care of itself," he said.
Comparing a company to Amazon has been the universal refrain of investors and executives alike. "Amazon lost money for years," they say.
That has been enough to silence most critics, and the ballooning stock prices have done the rest. But the Amazon comparison is an example of a logical fallacy. A fallacy runs like this: Tables have four legs, this has four legs, therefore this is a table.
It's the same structure as the Amazon defence: Amazon lost money to grow, this business is losing money to grow, therefore this business is just like Amazon. Just as some things with four legs are cats, and dogs have four legs, some businesses that lose a lot of money are on the road to disaster.
Amazon was a rarity among early online retailers in that it survived. Most failed. Some among the current crop of technology names will probably do likewise.
We rely on stock markets and venture capitalists to direct money to the companies that will create the jobs of the future. That's the whole point of investment — giving money to companies that can make good use of it. At the moment there is reason to question whether that's working properly.
A lot of fuss has sprung up around technology companies following the successes of Google, Facebook and Apple. But are the next crop as good as those ones were? They are giving us serious reasons to doubt it. And that might mean that we end up with a gap in the economy where all these great new companies were supposed to be.