Valuing Tech's Titans

Are we basing companies' valuations on the right criteria? In this long-form conversation, Scott and NYU Stern colleague Aswath Damodaran discuss what the top digital companies are really worth.
(2:07) Source: “International Netflix Subscriptions Surpass U.S.,” Statista, July 2017. bit.ly/2v3FLIK
(2:38) Source: RBC Capital Markets, June 2016.
(3:33) Source: “How Many Users Does Twitter Have?” The Motley Fool, April 2017. bit.ly/2w4qIfg
(4:11) Source: “How Much Time Do People Spend On Social Media?” Mediakix, December 2016. bit.ly/2oFfwWJ
(5:13) Source: “Amazon Inc Form 10-K,” Amazon, February 2017. bit.ly/2u31VXs
(9:16) Source: “Letter To Shareholders,” Amazon, 1997. bit.ly/1yx8xhu
(11:44) Source: “Amazon’s Long-Term Growth,” Business Insider, 2016. read.bi/20c5FVd
(12:25) Source: “Form S-1,” Snap, Inc., February 2017. bit.ly/2kmGKwj
(16:04) Source: “About Us,” Airbnb, 2017. bit.ly/18TOxV1
(16:31) Source: “RANKED: The 18 Companies Most Likely to Get Self-Driving Cars On The Road First,” Business Insider, April 2017. read.bi/2v3paVu
(20:16) Source: “Google and Facebook Devour the Ad and Data Pie. Scraps For Everyone Else,” Digital Content Next, June 2016. bit.ly/28JbGA9
(20:53) Source: “Number of Monthly Active WhatsApp Users Worldwide From April 2013 to January 2017 (in millions),” Statista, 2017. bit.ly/2j0uHH6
(21:39) Source: “Chart: Here’s How 5 Tech Giants Make Their Billions,” Visual Capitalist, May 2017. bit.ly/2qgkaIE
(23:09) Source: “Chart: Here’s How 5 Tech Giants Make Their Billions,” Visual Capitalist, May 2017. bit.ly/2qgkaIE
(23:31) Source: Google Finance, July 2017.
(24:56) Source: Google Finance, July 2017.
(25:36) Source: “Netflix Missed Its Q1 Subscriber Numbers But Q2 Looks Better,” recode, April 2017. bit.ly/2oFhtzW
More on Aswath Damodaran's research: damodaran.com
Episode 134

[@gordoncacioppo7701]

Damodaran's Excel models are a gold mine. Long live the king.

[@gordoncacioppo7701]

Scott Galloway Me love you long time?

[@ericcartmansh]

2 intelligent level headed people talking to each other :)

[@rs9301]

Scott Galloway please make your lecture available online

[@jaydenforest4116]

I know Im randomly asking but does anybody know of a tool to get back into an instagram account..? I was stupid forgot the login password. I appreciate any tricks you can offer me.

[@salvadorkeaton251]

@Jayden Forest Instablaster ;)

[@comp10]

Prof Galloway you should have online courses covering topics like fundamentals of business intelligence in tech or digital marketing analytics for young professionals/entrepreneurs who don't have the time or resources to do a full-time MBA. I know your a fan of the recurring revenue model, and I think many people will benefit.

[@tehllama42]

I'd argue that an online delivery graduate certificate program would make a lot of sense for NYU/Stern, given the content that already exists. Instead of just having information, something that goes on a CV, but isn't faculty intensive would be excellent. As a graduate student in an engineering field across the Hudson, I could still see tremendous value in something like that.

[@redcae1911]

dmez9891 ii

[@Sleeping-nomad]

dmez9891 I agree.

[@theodorcojoianu6967]

Checking this video now, you may want to check his latest start-up

[@christopherarmstrong2710]

This comment was prescient AF (commenting during COVID 19 pandemic).

[@himansuvarghese1181]

I love how he admits, "Let's talk about the company that I lost a lot of money on" like he's the foremost authority in valuing companies and he has no problem admitting he went wrong. Brilliant!!

[@davidbarclay3651]

Awesome! This format was amazing! Both very smart and wise.

[@davidwostrel]

Subscription based users that are locked in, and tech, you guys forgot to talk about Microsoft Office 365 and the Microsoft 365. The silent giant in the room with couple hundred million enterprise level subscriptions that would be hard pressed to go anywhere, it is damn near a 100% contract renewal because it is just too difficult to leave, and Google, Apple, and Amazons versions of this are "toy" feeling at best.

[@dubstar1981]

Plus Microsoft now sits on the whole LinkedIn database, too.

[@anandprahlad699]

Great example! 👍

[@axara006]

Microsoft in fact is prioritizing subscription to its Cloud service by offering deep discounts on office 365 (windows package) subscription to compete with rivals, like AWS.. Also, LinkedIn hasn’t been profitable post acquisition, so it’s user value is also questionable..

[@jasmeenmalhotra2225]

It is so eerie to watch this with the benefit of hindsight.

[@camsheet4649]

I wrote about Amazon in my economics class because I've learned so much through these videos

[@TildeathMusic]

Incredible thoughts, thank you for facilitating this conversation!

[@abuferasabdullah]

Patrick Finney really insightful talks

[@timstodz]

Yo Scott. I make my company sit down every week and watch your show. I hope you start making more long form shit like this. You two took such complex issues and made translated them so simply.

[@sergiog2930]

Hahahha how engaged are they? Do all of them are subscribers of the channel?

[@Showmetheevidence-]

So your company is just you... you’re a freelancer right? 😂

[@optionalinfo1]

Can anybody recommend really great youtube channels like this for good insights? Not just limited to business and tech. All fields.

[@ajporrasm]

"The market sentiment of Amazon is so powerful, that if you try to bet against it, you're going to be bankrupt before you're right"

[@Showmetheevidence-]

Generally.... shorting anything is dumb.

[@manojbaishya_]

@ 7:47

[@rollieize]

I'm glad you did that advertising drive a few months back!

[@alucard1116]

This was a great talk. Thank you. Here is my take that no one asked for. I have some disagreement on the few companies I look at closely. Uber had a perfect strategy the only concern is was it too soon. Uber was on its face a bet on autonomous cars. When it started that tech was already showing promise and I know that Kalanick saw that insane potential. With that in mind when you run through the business cycle you realize it is actually a terrible business as it will quickly trend toward commoditization. So then I speculate that the strategy was to grow at all cost to capture as much market share and brand recognition/loyalty prior to commoditization. Also, they would be able to grow a war chest that would allow them to invest quickly and massively into a autonomous fleet of cars. In '07 and '08 that was the only strategy that I saw working. The tough part is surviving the initial cash burn phase. So as long as Uber can survive till the first fully autonomous car hits the road it will be the 800 lbs gorilla in personal transportation. Sorry for that long take but it's my most focused company. Tesla might be the most exciting company for the next 20-30 years. Elon has shown that despite the hiccups he has been able to execute on every insane idea he has had up to this point. Brilliant guy with a strength of will. It is impossible to reasonably value Tesla as the upside is potentially enormous yet there are still a ton of risks lurking. Personally I love it and own it in my basket of autonomous car bets. Google is a one trick pony with weak management. I have zero interest in what it is doing. On Facebook I couldn't agree more with Mr. Damodaran, such a massive surprise that it has been able to start generating revenues at the current levels. Really impressed. However, same problem that Google has. The growth will be great and then it will saturate and have no other tricks to play. Amazon! I wonder who can compete. I have debated quite a bit about that company with my friend Patrick Badolato who is a great professor at Red McCombs school of business at UT. I figured Amazon would come up against real competition and would then have to adapt its strategy. That is now looking less and less likely and now I wonder if it truly will just be broken up by regulators in 20 years as it swallows the entire retail and delivery market. Bezos like Musk is someone that has earned their status as brilliant leaders. It should be noted that Amazon more than almost any other company save Uber will be affected by the coming autonomous car story. Oh and on a side note the next really interesting company might be Nvidia which kind of came out of left field for me. Sorry if that was too long. Thanks again for the interesting videos.

[@selenick]

This was a really good one, a lot of insight for people that aren't college professors or Wall Street investors.

[@eficzeri]

Love this channel. No others like it here

[@SuperMario-jx8zp]

Professor Damodaran is the best, I have his book "Investment Valuation". Congratulations professor.

[@grover2g]

Great session with prof. Damodaran. I hope to see more like this in the future.

[@lancerloco]

as the saying goes, so much can change in a year...please have this man back on..year after year

[@tonynelson5229]

How could you leave Tesla out of the list of top 10 Companies Developing Self Driving Cars?

[@jawsh5628]

More videos with the professor! He's so insightful on such an important topic.

[@trevorvossberg43]

70 Billion in a private market is no 70 billion in a public market because liquidity preference. Good point.

[@vdokurt]

Hi- can someone please explain this? What is liquidity preference? Does it mean it's easier for private market investors to exit?

[@juliousg]

Amazon is doing what John D. Rockefeller did

[@ZubairKhan-tt8ev]

yes, many parallels with its' no-holds-barred approach to competition and offering incredible value to customers.

[@voicification]

I have always thought of bezos as the 21sr century J D Rockefeller. Glad I am not the only one.

[@teatowel11]

Your best interview that I have seen. Very informative about tech but principles that are further reaching.

[@andyfarr6981]

Great interview, a question on Microsoft would have been nice.

[@imserdar]

Love this channel

[@nicholaslindblad5349]

Great work Scott! Mr. Damodaran was spellbinding.

[@zkinzer]

This was great! Very informative. Thank you.

[@adamsilverman4351]

I can listen to these two talk all day.

[@templogical3095]

Adam Silverman ok

[@Roman_Ivanov105]

Cool, this is what I understand, support, such stars for the project

[@Showmetheevidence-]

Nice questions, but more importantly - you let Aswath talk (which is the point of “interviews” right)!

[@jonatanmendoza6768]

Amazon seems to have obscure things I need on prime shipping when I need them. Example a gs70 stealth pro CPU OEM fan that was 39+ dollars shipping on ebay and many other sites was 24 dollars with prime shipping. It wasn't just a generic it was the exact same one my laptop came with while others only had a generic or different brand. Same thing happened with a new battery i needed though this time I guess they know I have a gs70

[@jlineberry5786]

Thanks guys, don't stop making content like this.

[@kurtlatchman]

This guy taught valuation for two days in my Global IB Training Program. Wish people on the street actually took his advice to valuation more. I'm sure smaller shops are

[@railtorail]

Regarding Uber its not capital intensive but do algorithms not count as barriers to entry? Pagerank is probably the biggest barrier to competition in history. Supply demand optimisation algorithms used to manage rides aren't trivial, they poached several AI experts to help in this endeavour. Seems like the capital calculation here doesn't count software based capital.

[@BenGoldwater]

Phenomenal interview! A big thank you to professor Damodaran for sharing his insight on the market and of course to Galloway for another informative video.

[@johngalt1961]

Great talk. Love both these guys. I wish they'd both come and speak at our conference in September.

[@AboveAllBeOriginal]

SCOTT I KNOW YOU HEAR THIS A LOT BUT ILL SAY IT AGAIN: IT IS SO LONG AND I LOVE IT, MORE PLEASE

[@pimpsup27]

He was spot on about Disney.

[@3monsterbeast]

i’m watching this in 2020 and every one of his views have - so far, held up!

[@Danmoorevt]

Love the talk. Why doesn’t L2 have a big podcasting arm? Love Scott, team and the great video production. L2 is like ESPN for business and tech nerds!

[@EnragedSephiroth]

When I think of Twitter now all that comes to mind is the president posting a ton of dumb shit and people responding to or perpetuating his dumb shit. $0 value is a fair assessment.

[@redcae1911]

My top 2 favourite professors Can choose who of them makes us better Many thanks from Cyprus

[@johnta17]

I wish you two were at NYU when I went there back in the 90s, of course the internet was in its infancy so this might be moot.

[@Sleeping-nomad]

Keep it up! Love the format! 👌

[@danabram]

Lol the only social network I have left is Twitter because it's a public forum and real time news.

[@petez4608]

This was so educational. Thank you.

[@evarlast]

great discussion. no mention of amazon's failures. Fire Phone? Destination? WebPay? Auction? Endless? It doesn't matter because amazon can continue to grow without entering these new markets, which only gives more evidence to the strength of their game.

[@aj2291]

After two years- Apple (stock price) has gone up, Netflix has tumbled, FB has gone down, Google has gone down, Amazon has gone up, Tesla has gone up by 20% (last week, we’ll see long term). So except Amazon these guys were wrong about everything else. Market is more relevant than any Star CEO and any Star professor. Period. Love Scott G though.

[@nafis_zaki]

Now watch the market again.

[@AlainGuillot]

Thank you for this informative video.

[@TheWhocares233]

Hi Prof. Galloway, I love your channel and am glad I DIDN'T skip your ad (even though you say advertisements are not working), My question is what is your perspective on the valuation of Square Inc.? Every small business owner uses their product and says the convenience is well worth the 2.75% processing fee. Thanks!

[@jacoblester8477]

See my thing is amazon isn't doing anything anti competitive with retailers, they're just better at the game than anyone else. Is hyper competence an unfair advantage? And as for aws, they are the biggest player, Microsoft is the biggest player in desktop os and office software and no one is coming after them

[@jacoblester8477]

30 years ago yeah. i mean now when they are still the only player in office suite software and the only player in desktop os. and they are right behind amazon in cloud computing in terms of scale.

[@lowinterrence]

Absolutely amazing interview

[@jimmythd1043]

I'm honestly mad you guys didn't link his site

[@klinglerinsurance]

Great interview. Very insightful.

[@anonymous-sec]

Love this channel, some real talk 🙂

[@danitimnev2102]

The market for the big 4 has grown 2x in the time since this was recorded. crazy

[@mrnaveen10001]

It is a great knowledgeable discussion between both of you. Profs Galloway can you provide more insight knowledge on Semi conductor chip companies like intel, qualcomm ,amd and nvidia. Does the valuation of these companies or performance seasonable in long run.

[@joelmonteiro1419]

Even at 7-8, SNAP os a terrible investment. They won't be around in 5 years.

[@dubstar1981]

Why won't they be around in 5 years?

[@223554545]

That what they said about apple, tsla, Facebook

[@JordanBaumgardner]

*Long Slow Clap* and a Tip of the Hat to you both. Thank you. Scott, I'd love to hear more about how you implement these ideas in your own company. How much am I worth? I subscribe, I share sometimes, I look forward to your vids, not connected on FB or G+ .... How to you quantify your customers?

[@adamcfmacdonald]

excellent, thank you.

[@jhenisethe4th]

Thanks for this, really good watch! Would like to hear something about opinions on NVDA... seem to be growing too fast!

[@xxaxle]

I'd like to see some analysis on Microsoft, Alibaba, and Adidas! (And Berkshire)

[@nolisto1]

My advise. Just buy an etf that tracks the whole market and leave the stock picking to gamblers. Leave stock picking and timing the market to fortune tellers.

[@Misterz3r0]

If Time Warner ever decided to turn HBO into a Netflix clone, it would fucking really give Netflix a run for its money. By Netflix clone, I mean really build up their current streaming platform to include a vast library of movies, not just a few blockbusters from last summer. Expand original content by threefold, with online only features. They have the entertainment connections to make that happen. And include more adult films and hentai, and not just softcore, but only as an opt-in/add-on. They would fucking kill Netflix.

[@Showmetheevidence-]

Good idea/analysis. Gotta ask yourself why they haven’t done this yet though?

[@Swermie]

This was a really fucking good video.

[@rfpeace]

these are great! Thanks Scott 🤑

[@HsupermanAdventures]

Mr Scott ! T y for this video

[@Showmetheevidence-]

Uber... has to cover “platform” costs and driver costs. And that’s always the problem. Is it *that* much more convenient than just getting a ride with a friend, driving yourself or using a bus/train etc? For me - pretty much no. I only use Uber if I’m partying.

[@stevenlin8577]

I need to go to Stern.

[@jsands4027]

This is great free content... I feel like I should be paying! (But don't make me pay!)

[@ninjamaster3453]

amazon just missed EPS by over a $1. $39bn revenue a quarter and only .40 to the bottom line?

[@tehllama42]

As discussed, Amazon isn't tied to revenue reports in anywhere near the same way as ordinary EBIDTA valued blue-chip companies would be - there will probably be a correction in some form reflecting what implications those revenue figures would have on market cap projections, but that's probably about it... I'm increasingly a believer that they have in fact changed the space, as Scott has said, to where vision has replaced standard metrics.

[@ckirkyg]

awesome - more spending and more scaling

[@beautydoctorcardiff]

Would be nice to see were the two of you are about your evaluation 3 years on, encore

[@samzhang4899]

Did I misunderstood what Damodaran said, or he suggested "keep investing if you are below 70% sure there will be a 15% downward correction?" This means he expect to make 35% return in the 30% case of no downward correction (70% * 15% / 30%)? My intuition is saying this doesn't make any sense.

[@sanjayaiyar4351]

Sam Zhang Not sure what you mean with that formula but it seems like he’s saying unless your very very sure a 15% correction is coming (during which you can buy stock on the cheap), just keep investing regularly or you’ll miss a lot of upside waiting for a downturn that never occurs.

[@paulsellssocal1924]

70% chance in a year is a great rule of thumb. At 4% he sells, not at 2%. He's great!

[@olga2you]

HAIN I think has been super undervalued. It's been my fav stick to hold ☺️. Too bad it's a fantasy league😒. I think crashes happen every 7/8 years except the decades with adequate regulation 🙏🏻.

[@brianmurray2687]

TESLA not on the list of top 10 companies developing self driving cars? How do you define top ten? Or for that matter developing? Perhaps they were not included because they already have one.

[@dtnguyen75]

Just watch this now. And wonder what prof D would say now about all the companies he reviewed then

[@offwallstreet6386]

I'm a simple man. I see our Lord Aswath I listen.

[@PeterDawoud]

Not going to lie... I found this really interesting. Although I would love to hear your take on Microsoft.

[@StinkinDoctor]

Hi peter, if you want to learn more about microsoft you can refer to what's inside your pants

[@Elclassicodelaelbe]

nice job!

[@calvinmabi7579]

Amazing!!!

[@wm6549]

Can you interview Prof. Damodaran again?

[@johnag7784]

mental stimulation

[@DRGTLSSNDR]

Amazon, Amazon, Amazon, Amazon, Amazon, Amazon, Amazon... Amazonia country by 2035

[@mitchqqqqqq]

2025*

[@gooogaby14]

Y Alessandro Dragoti grguuunfty hiuu

[@The757packerfan]

I love Amazon and will always support them, but I'm also afraid they will try to sell us Gatorade for our lawns and farms saying, "Electrolytes - it's what plants crave" and then it's all over.

[@jacoblester8477]

22:50 KZbin by itself is worth 76 billion. They are successful in other spheres I think they just lack focus

[@michaelwu8153]

Two great people, but India's importance was exaggerated. Sure it has a lot of people, but the average Indian is a lot poorer than the average African. I don't think Netflix is trying to enter the Chinese market because they have next to zero content in Chinese.

[@ryanw7256]

watch amazon or netflix open up a theme park

[@andyfarr6981]

Netflix already has rides. "Netflix & Chill"

[@rakshithn7484]

Why do you rarely speak about Microsoft.

[@andyfarr6981]

Said the same thing.

[@vineetmishra2690]

Enterprise bursiness is boring. Put money make money. Much like real estate

[@OnionKnight541]

I *like* Prof Damodaran, but man, I really think he's off on 90% of what he says here. At every question Scott put to him, I had this feeling like, "Eeh, that's the wrong answer, but ~fine, whatever.~" It seems Aswath has merely an incidental understanding of the value of technology companies. This incapacity culminated when he proposed Apple's stock would drop to $80 if the iPhone 8 doesn't sell well and Scott (hahaha!) winces his dissent (bravo, by the way). Aswath has the calcified biases of someone who has been burnt on a bad stock play, and then wants to *speak* the capital turn-around into fruition.

[@blakethomson7775]

I think Amazon is turning into the chipotle exxon verixon, forewarned by Parks and Rec.

[@christopherarmstrong2710]

24:15 Apple is the greatest cash machine in history, but it is a mature company so you're not going to get 20% growth. 27:00 Tesla and Elon Musk

[@josearaujo8616]

+2 years and still no recession... How can such 2 brilliant minds miss the obvious, that markets were and still are being driven by risk... you don't have any other place to go than the market....

[@johngalt1961]

I think there's more ecosystem value in Apple than Damodoran is implying. But yeah, Google is the better business.

[@MsJnjnjn]

The host is obsessed with Amazon

[@MsJnjnjn]

Lol, great videos! Entertaining and very insightful.

[@andyfarr6981]

Please delete this post before your Alexa reads it. RIP Jamie

[@thatstherecipe]

Scott u got a sick ass job homie. Yall niggas hiring?

[@robertcalamusso4218]

May 20 2020. Amazon 2400 per share. Oops

[@dubstar1981]

Agree that Uber is doomed.

[@davidscroggins2]

Amazon stock split please :) :(

[@Enyonam214]

David Scroggins not a chance