The cocaine nose jobs of Wall Street who created the dot.com bubble seem set to do the same thing again.
Spotify has reportedly been valued at $4 billion after securing $250 million in financing for global expansion. The round of funding, spearheaded by Technology Crossover Ventures, will help the music streaming giant break into new territories such as Japan, enthused The Wall Street Journal. .
However, the valuation figure is a little daft. It makes the company more valuable than Pandora in terms of market capitalisation, with the firm’s US rival currently worth $5.7 billion.
The Journal said that the Swedish company has pulled in more revenue than Pandora over the last financial year – $585 million compared to its competitor’s $427 million, most of which was generated from sales of premium subscriptions.
The only downside is that none of them have made any money. Pandora said it had a third-quarter loss of $1.7 million as it spent more on content and sales and marketing.
Spotify pulls in most of its revenue from premium subscriptions and the rest from advertisers. It also has more than 24 million active free users.
In other words, they are both valuable to Wall Street and yet none are actually making profits yet. True they are on their way to making profits, but they are a long way from doing so yet. For those with long memories that was the scenario which was playing out during the dotcom bubble bursting.