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article imageOp-Ed: Why Social Media May Deliver the Next DotCom Bubble

By David Amerland     Aug 14, 2012 in Internet
The intense speculation on social media companies is delivering all the ingredients necessary for a social media bubble.
Human memory is depressingly short. No sooner have we been burnt that we forget, our eyes enamoured by the next shiny toy, our minds telling us, against all evidence, that somehow this is going to be different.
The shiny world of tech and the web has offered us many examples which echo the madness and abandonment of common sense that history tells us ruled during the extraordinary Dutch tulip madness in the 17th century. In the closing years of the last century we saw the same fervent madness take hold with anything that was a dot com.
Suddenly tying conventions such as a business plan, demonstrable value, the ability to generate growth through a planned expansion and a clear understanding between the target audience and what a digital real estate could deliver were considered to be passé in a world which valued concept more than sense.
Predictably those who blindly rushed into that breach waving their fistfuls of dollars, crashed and burnt. Out of those ashes emerged the eCommerce culture of today which puts in place business plans, return-on-investment (ROI) metrics and a predicting mechanisms designed to show expected shareholder value based on the delivery of specific, unique services.
Enter social media. As an umbrella term it has become another tulip, standing in the minds of those with more money than sense not for what it really is, but as yet another shiny toy which somehow defies the trajectory of everything which has worked to date and magically pulls out value from thin air.
I know it sounds depressingly familiar and tiresome to consider. Yet, that’s where it is. The term made it possible for Facebook to float at $100 billion plus. It allowed Instagram, essentially a phone app, to be bought for over $1 billion and has been behind some of the biggest hot air theories parlayed this century. Predictably it is delivering its own road littered with charred remains.
Facebook’s stock is at the lowest level yet since flotation (something of a record), Instagram has been all but shelved as Facebook that had bought it brought out its own competing app and Zynga, the company that’s made digital farmers out of Facebook junkies is facing a chill wind as, from one perspective, a slowdown in digital farming produces a huge dip in its real life stock value.
Is there something we can learn from all this? Like, really learn to the point where we do not repeat the mistakes of the past? The solution is as obvious as it is boring. In the digital economy of today what has always worked are business models which were based on a proper business plan, had a service or product to deliver which contained some unique selling points (USPs) and were backed by a plan for growth that was controlled by the company rather than the whims of its users.
Google, Apple, Microsoft, even Yahoo, delivered along those lines. Obviously the fact that we called these businesses eCommerce served to focus the mind on the fact that the common sense rules of commerce applied. The fact that the term “Social Media” like “Dot Com” before it and “Tulip Bulb” before that were new, somehow excused the need to be diligent in our assessment of their potential.
As long as there are people who can overlook the obvious in search of a ‘magical’ solution to investment and growth, there will be people willing to overhype something new and imprecisely understood and oversell it. Boom and bust bubbles are unlikely to go away and a social media led one may be just about to happen.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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