Monday, November 24, 2008

Facebook Valuation is like a Zillow Zestimate

The latest word on the street is that Facebook initiated discussions with Twitter for the purposes of buying the micro-blogging service. However, according to TechCrunch, the talks broke down partially because Facebook wanted to make the purchase with mostly stock (at a $15B valuation). The sticking point was that Twitter executives and investors didn't think that Facebook was actually worth $15B and decided against a deal. Even if Microsoft did just invest $240M into the company at that stratospheric valuation, other people were apparently not believers.

This same phenomenon is happening with Zillow Zestimates, at least here in the SF Bay Area. Zillow uses a proprietary algorithm along with historical home sales, local trends and lots of other 'black box' stuff to come up with a Zestimate (what your house is worth today) for your home. The problem is that this Zestimate is often times $50K-$200K higher than what you can actually sell it for (at least in the areas that I've looked). It obviously depends on each house, but most Zestimate values need to be discounted by a healthy percentage to get to a home's true value today.

While these two examples do not seemingly have any tie to actual car prices, they do underscore the need that all consumers have to know the actual price paid for something that has an opaque value (a house, a stock, or a car). In fact, the best way to know what something is truly worth is to know what someone else is willing to pay for it. With Facebook, Microsoft may have overvalued the company just for the opportunity to participate. With Zillow, since each house is different, each person's value will be different. With cars, which are commodities for the most part (with mileage, condition & location as the biggest variables), value can be derived directly from what other people paid for the same car.

With over 17,000 actual sales price data points for new & used cars, we're hoping that the actual values you see in our data will represent the true value of the car, not an inflated value that you don't completely trust.

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Sunday, November 23, 2008

Mitt Romney on the Auto Bailout

The big news of the week has been the proposed big 3 US automaker bailout by the government. Should the government save GM, Ford and Chrysler from bankruptcy? Should they let the companies suffer the consequences of decades of poor decision making and mis-management?

Here is a great editorial on the situation from Mitt Romney - a former Republican presidential candidate from this year's election. Romney has a unique perspective on the situation since his dad used to run American Motors (produces of the wonderful AMC Pacer and Gremlin).

Romney's position on the matter is pretty obvious, given the title of his op-ed: Let Detroit Go Bankrupt in the NY Times.

A few facts about the US auto industry compared to foreign companies who have manufacturing plants here in the US:

- US autoworker: $71 per hour (including benefits)
- Foreign autoworker (at a US plant): $47 per hour (including benefits)
- $2000 - the additional cost per car that US automakers must shoulder due to the massive union contracts and benefits they must pay out. With margins already so slim on new cars, it's pretty easy to see why the big 3 are having problems making money.

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Tuesday, November 11, 2008

A must "see" for all of you Rubber Neckers!

Why is it that every time there is a car accident on the freeway, people insist on slowing down to rubberneck? When there are wrecked cars blocking the roadway, I can understand. Otherwise, I think people just can't help themselves to see how bad the wreckage is.

For all of you rubberneckers out there (myself included), I came across this site that you'll love. is site that has pictures of expensive, wrecked cars. Since the Porsche 911 is one of the more popular cars on PriceHub, I'll use this as an example:

The site has tons of pictures that chronicle the destruction of European and American aluminum, steel and glass. There is enough carnage here to satisfy even the most curious rubbernecker.

Don't miss these wrecked police cars either.

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