Right now, with all the negativity surrounding the technology sector, let us play a little game. Let us assume that the world will continue to fall apart, that death has come to technology, that social media, mobile and the cloud are finished. The social media critics have finally gotten their moment of glory, they have actually made money on their short positions. The game I hate to inform these bearish fools, has just begun. Let us attempt to create an argument that the future of both mobile and social media has collapsed, attempting to infer the worst case scenario.

In this factitious scenario, everything has obviously fallen apart. One will immediately ask, how will these horrible bubblicious tech companies make it through the next phase of technology growth? The answer comes easy, and the critics shall be dumbfounded, they will take part in the next exciting tech phase. Look at both Apple and Zynga, they have tons of cash. From my modest understanding of business, cash reigns supreme (just ask those that bought stocks in 2009). So assuming the worst has befallen many of the tech companies, mobile phones quit selling, people around the world turn off there cell phones, the 900 million Facebook users quit sharing, many tech companies will be able to profit from the next phase by merely buying into it with their hoards of cash.

Well you say, you have looked past the tech companies like Yelp, that lack cash on hand. Patron of capital overlook, critic of the social media, you sir seem to miss the big picture once again. What would a company like Yelp and those similar to it do without the potential of mobile and the foreshadowed profit from it? Innovate. Being a product of innovation and entrepreneurship, technology companies are some of the greatest innovators and entrepreneurs of our time. Mark Zuckerberg has been compared to Bill Gates and many other greats. These comparisons are not made because these young technology CEO’s are stupid. The comparisons are made, because these young men and women are the leaders of their field and will continue to innovate to stay on the top of their field. What seperates them from other companies is the fact that their CEO’s are often times serial entrepreneurs, so innovation comes with ease. Even if these company leaders are not serial entrepreneurs, they emanate entrepreneurship, just look at the progress in the last few years of many of their products. This may be a far stretch for some, but Apple did not get its gold star through a lack of innovation. For example, look at the story for Yelp is similar, they see a need and they fill it. If this need exists on a phone, in a tablet, or in a spaceship headed towards mars, they will innovate and profit from it.

Let us make some more rash assumptions, that these new companies have no cash and no innovation. Making the assumption that these technology companies will never be able to monetize anything and that their entrepreneurial spirit is a giant scam, where are we left? We are left with everyone in Silicone Valley being wrong, all the big money supporting the mobile and social media space being, take a guess, WRONG. In this hypothetical world we create, all these new companies that continue to get funding and grow users are not the future. We are assuming all the big and smart money has no knowledge. So again where are these companies left, without mobile and social media (and cloud)? The answer is simple they profit in the old way. They will take the massive amount of date they have collected and sell it in paper form. Yelp will publish reviews on paper and hand them out, Facebook will cease to exist and people will talk to each other in person, and Zynga will produce games for the Nintendo 64. If technology is not the future, go ahead buy stakes in the Yellow Pages and the Nintendo 64, while you are at it, invest in some rotary phones, because hell, the best investing takes place ahead of the curve.

Disclaimer: I am long some social media stocks, the social media critics are coming for me, so I’ll stay strapped.

For more of my previous opinions on social media click here and here.

Photo by Rob Boudon

The negativity surrounding Zynga has led to a significant decline in the equity price, leaving many long term investors in the red. This recent price decline can be seen as a counter balance to the price increase seen in the earlier part of the year. At that time, many factors contributed to the increase. Among the most prominent were anticipation of the Facebook IPO and the possibility of a partnership with Wynn Resorts in the future. This exciting news had great benefits for Zynga shareholders as the market took notice of the companies potential. Though Zynga received a bump due to associations with big names like Facebook and Wynn Resorts, the market has failed to realize that Zynga’s business model allows for the company to grow and profit heavily through its effective monetization of products.

Considering the large sums of cash on hand and the potential for future profit growth, it would be an insult to associate the terms “unprofitable” and “tech bubble” with this enterprise. Zynga stands poised to make money for itself and investors through delivery of quality mobile gaming applications that are easily monetized. In the recent years, we have seen an increasing number of consumers turn to smart phones and mobile devices to fulfill their computing needs. In the gaming world, there has been a stark increase in the number of games played on mobile devices. In general this shift towards handheld devices and mobile computing will merge resulting in huge profits for Zynga. Apple, a prime example of the growth in the smartphone space, has given a great return to investors through their exposure to the unprecedented growth in the smartphone market. Because of the increase in the quality and availability of mobile gaming platforms, Zynga stands at the epicenter of this revolution to mobile gaming. The mobile games Zynga produces have the ability to be played on all platforms, be it that of Google, Apple, or any other smartphone leader that emerges in the coming years. Even if hype of Facebook and Wynn fails Zynga, Zynga stands ready receive unprecedented profits through the mobile gaming revolution.

With big names like Morgan Stanley and Barclays holding shares of Zynga, the current animosity towards this stock seems excessive. Additionally, many major analyst showed huge support during their latest conference call. The Q/A suggested strong support of Zynga’s business model and potential for growth. Skeptics point to the decline in Zynga’s DAU in many of its popular titles as catalyst for lower stock prices. These skeptics fail to realize that is part of the natural life cycle of gaming products. Avid console users trade games to GameStop on a regular basis to pick up different title. With current technology, exchanging a game is as easy as deleting it and adding another title. Switching to another game can be equated to changing channels on one’s television. With Zynga’s varied portfolio of games they are set to profit whenever a smartphone user changes his or her mind, for instance, retiring “Words With Friends” for “Draw Something.” Skeptics also insinuate that Zynga has failed to monetize their DAU. That point is valid, but given the context of the situation, remains immaterial. This merely suggests that in the coming months and years that Zynga will be able to better monetize their content, returning profits to shareholders. A prime example of this can be seen in the recent integration of Nike product placement in the “Draw Something” application. This novel method of product monetization highlights Zynga’s ingenuity and conjures hopes of furthered creativity in monetization. Mobile monetization, as mentioned recently in the financial news of Facebook, still sits in its infancy. Itis reminiscent of the early days of Google AdWords. The monetization of content by both Zynga and Facebook has ceased to be a choice. With the ingenuity these companies have shown in the past, in the creation of their unique enterprises, they are surely to profit handsomely from their millions of users in the future.

The potential Zynga has as it’s own company surpasses the scope of next week, well past the Facebook IPO. Zynga has positioned themselves in a market with massive growth potential, both domestically and abroad. They will be able to profit from all mobile carriers and will not be constrained to one product manufacture. The Electronic Arts CEO John Riccitiello recently spoke out against Zynga, suggesting that they and other companies in the social gaming market were purchasing startups at exaggerated price. With the responding negative price action in Zynga, one can be left wondering about the OMGPOP purchase. An appropriate rebuttal to Mr. Riccitiello’s comments would be that he lacks understanding of the mobile gaming market and furthermore that he is blind to the potential in this sector. Zynga, however, is poised to take advantage of this potential, all while taking in massive profits.

Photo by h.koppdelaney

You have heard enough advise suggesting what tomorrow will bring, only the tape will tell the true story of Facebook. Whichever way tomorrow trades, up or down, the movie below will get you excited about the day that will go down in history.

The market has turned into a giant game of chicken. I sit and watch the stream of news and ticker prices, wondering who will buck first, the bulls or the bears. On the bull side, I see a group that has the support of the recovering economy of the United States. On the bear side, they sit hoping that Greece falls apart bringing the European Union down with it. Let us take a deeper look into both sides of the argument to see who will prevail in the heated game of chicken.

Looking at the bull side of the argument, we see a lot that was not here a year ago. Economic news has gotten substantially better. One still sits and questions the employment data, knowing that the numbers are not as good as the 8.1% suggests, at the same time, the number is far from the teens. Whichever barometer one looks at the y/y numbers, the data has improved substantially, enough to look past a double dip. The good data has slightly fallen off in the last few months, don’t get me wrong, but that is par for the course. One can look at the U.S. economic picture, the company earnings, and look towards the end of the year and see that a double dip is nowhere near part of the game plan. The bull case, or the case in which the world does not end, seems to hold some merit into the last half of the year.

Taking a long hard look at the bear side, a group that I have been part of for a majority of the rally into the first half of 2012, one can be left wondering. Wondering what exactly the consequences are of the Euro mess, what exactly can go wrong in China, and how low the market can go? The Europe mess has legs, no question. If things fall apart across the pond, it will likely not be a good year for anyone. Though, what are the real chances of things falling apart? If the European Union wanted Greece out, wouldn’t they have pulled the plug some time ago? The truth seems apparent, the European Union will attempt to stick together, whatever it takes. They may end up kicking Greece out at some point, whatever the E.U. chooses, it will be to preserve a strong European Union. China and the BRIC countries have seen slowing growth as of late, but the hard landing suggested some time ago, has recently lost merit. The bear has had some good support as of late, but U.S. growth, earnings, and balance sheets suggest a healthy business environment for U.S. equity markets.

Obviously there are many more facts that I failed to cover in the short post. One thing remains true no matter what facts are presented, the bull side looks strong. It may take some magic to make new highs, but the end of the world is far from here. The markets have been fooled before, and they may not be the sharpest around, but they won’t get fooled this time. I sat hoping and praying for the European mess to fall apart at the beginning of the year, it didn’t happen. It didn’t happen this year, last year, and the times before that. I suggest one quits hoping and praying for the end and looks at the facts. With or without Greece the E.U. will come back stronger, the recession in Europe will linger, but the recovery will not double dip here in the states.

I was sitting at having coffee with my old man yesterday morning, talking shop. We were talking technology companies, and he said something that baffled me, “It feels like the tech bubble all over again.” Initially I was quite baffled. What he said was contrary to all my beliefs and current stock holdings, then it hit me, he didn’t get it. It was that simple, he merely did not understand the current market situation for technology companies. I wont go as far to say my fathers a dinosaur or lacks investing intelligence, he just doesn’t think about tech companies the way I do, the way investors should in the current market.

It hit me, like a ton of bricks, and made perfect sense. A majority of investors are so worried about their past mistakes they can’t see the future right in front of them. So many long term investors are fearful of the chaos the tech bubble of the 90’s wreaked on their portfolios, how they were fooled into thinking that companies had potential when they did not. Today, many of those investors are still around, and they watch the market with blinders on. These individuals fail to realize the growth potential of a technology company compared to the ig box store, the growth potential in mobile, the future of the worlds technology needs. No longer are companies coming to market that don’t offer services, revenues, or users. The technology companies of today are part of our daily life. The younger generations no longer check the paper for the news, rather log into their twitter from their smartphone. The dinosaurs of the investing world will be missing the growth potential and great returns in the coming months.

I constantly hear that the first day of Facebook will likely be huge, but after that the day of reckoning will come. Why is Facebook destined to trade down? I am not suggesting that the stock will trade in one direction, it’s a market, stocks trade both directions. To suggest that the peak of Facebook’s stock price and return to investors will be the first day is just ridiculous. This could be the year of tech, or the decade of tech for that matter. The growth potential is huge, the monetization will come, and the returns for investors will be obvious.