In my years as a financial advisor, I saw people time and time again hear about the stock that was going to make them a fortune. Listening to the hype and talking themselves into believing that they were going to miss out on a big payday, they jumped in based upon a feeding frenzy rather than looking at things objectively.
The same is happening again with the media companies. Paul R. La Monica, writing for money.cnn.com, gives his comments on what is happening now in this marketplace.
"With News Corp.'s stock rising nearly 20 percent so far this year, partly due to enthusiasm about the growth potential of MySpace, other "old" media firms are now said to be scrambling to find their own MySpace so they too can tell advertisers they have a huge audience of teens and young adults that are just dying to spend money on gadgets, movies, music and other trivial pursuits.
"And I fear that the rush to become a hipster online play could lead media companies like Walt Disney (DIS), Viacom (VIA) and my parent company Time Warner (TWX) to repeat the mistakes many of them made at the height of the last dot.com mania and overpay in their attempts to uh, out-Fox News Corp. and MySpace."
I think he's right. You can see the new frenzy building concerning Time Warner landing MySpace, and the rest of the media world thinking that they've developed some type of huge lead on them in the Internet space. There may be a little truth to that, but in reality, MySpace is just a tiny portion of the overall Time Warner empire.
Now that other social networking sites are being offered large amounts of money (and turning them down), they think that they are ripe to make a fortune. The word is that Facebook may have already turned down an offer of $750 million and are allegedly asking $2 billion.
Bebo.com, which is bigger than MySpace in the U.K., has received feelers from several large companies and rumor has it that they could be trying to fetch $1 billion.
With the overall entertainment and media world in a trend of transition, and a lot of things still not worked out on where and what is going to happen, those companies that rush in and grab companies for prices far beyond what they're worth, could damage themeselves for years ahead. They did it a few years ago; I wonder if they've learned anything at all?
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