It’s sexy to say that the recent valuations of social networking companies and platforms is very similar to the dot com bubble valuations. Except, it was easy to see back then ( or is that now?) that commerce driven sites whose success was going to be reliant on transactions is a lot different than social sites and platforms with hundreds of millions of people with millions upon millions of daily visits that are reliant on nothing more than activity, conversations, shares, likes and content creation.
The implicit difference between the 2 bubbles, if we’re indeed going to call this period in tech history as a social media bubble, is that one was propped up on just bad business models and just plain dumb valuations, where the traffic had to buy product or the traffic had to go to a physical location whereas with all the social sites, the action and the CTR’s, its still predicated on traffic, but the traffic doesn’t necessarily have to buy something in order for the network to thrive.
It’s community based and people based and not sales based. Though the model to make money in social networks is still based on traffic pouring through the site- the need to separate someone from their cash isn’t as large a priority as it was in the dot com bubble days. Big diff
Timely stuff, Marc. With the LinkedIn IPO, the social media bubble talk is sure to be as lively as ever.
The main reason I don’t think we’re in a bubble is the absence of a phrase I believe Alan Greenspan coined: “Irrational exuberance.”
Yes, much of the lust over social networks is “irrational” (mostly by SM consultants — everyday consumers don’t gush and fawn the way we do). But what I don’t see — particularly from investors — is exuberance.
The real estate bubble(s), the tech bubbles — these things happened in gleeful heydays, when money seemed abundant and giddy consumption had no consequences.
Despite some economic improvement, there’s still a still a collective soberness to the U.S. and global economies. We’re more cautious…out of fear more than prudence, perhaps, but more deliberate nonetheless.
“community based and people based and not sales based” – which is why this bubble is even more stupid than the previous one. Facebook has nothing to sell. LinkedIn makes very little profit. There is no reason to suppose that users are suddenly going to start paying for something they’ve always had for free, especially when the “product” is nearly worthless anyway (how many Facebook friends are worth one real one?). History will show again that people learn nothing from history.
@Melvin but wouldn’t you agree that the initial dot com bubble was forged on sales and traffic? and this “bubble” has more of a solid footing?
@Scott, so we have learned from our mistakes, Exuberance is a great word and I have to think that its measured the second time around…
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