5 Reasons Why Social Media is Not the Next Bubble

A recent Financial Edge article suggested that social media is the next bubble, with over-hyped valuations, waiting to burst on an unsuspecting throng of investors. I have my doubts....


A recent Financial Edge article suggested that social media is the next bubble, with over-hyped valuations, waiting to burst on an unsuspecting throng of investors. I have my doubts. Here are 5 reasons why I think the valuation of social media companies is largely justified:

  1. Facebook is worth $30 billion – Facebook’s $30 billion valuation is the target for most critics, yet Facebook isn’t just a network of 500 million people, it’s a marketplace where real money is spent and made. Zynga‘s games alone are worth tens of $ millions in revenue and there are thousands of developers creating new games, tools, networks and plugins for Facebook every day. It’s a global industry, employing (albeit indirectly) hundreds of thousands of people – so, I would say, justifiably highly valued.

  2. Social media is growing up – While many social tools and services started out as free, the industry as a whole is growing up to the fact that it HAS to make money. Groupon is setting the tone for social businesses by charging (some would say over-charging) a hefty fee for it’s services. MarketMeSuite, the brilliant social media marketing dashboard [disclosure: I’m an Advisor] charges $5.99/month. No freemium model. If you want it – you have to pay. And guess what? Customers are happy to pay for a great service.

  3. Media is as old as the hills – We all talk about social media being new, but in reality it’s just the latest evolution of “The Media”, which started out with the Ten Commandments and has’t stopped evolving since. Social media isn’t a blip or a passing phase – it’s the latest incarnation of something society absolutely cannot do without. The big difference is, we’re no longer reliant on news-makers for the story. We are the news-makers.

  4. Business is still slumbering – While most of us now use social media with friends, remarkably few businesses have realised the value of social media communications, for marketing, customer comms, PR, sales, research, product management etc. This is a massive industry still waiting to happen. Take social CRM for example. I predict that by 2012 most large businesses will be seeking to integrate the social web into their CRM systems (if they aren’t already), the investment will be huge.

  5. Twitter is still underestimated – For most of the businesses I advise, the most powerful social media tool available to them is Twitter. Yes, it’s messy and hard to understand, but there are tools emerging that monitor, categorise, store and organise the bites of information we share via Twitter, making it much more manageable and valuable. Additionally, in the same way as Facebook is a marketplace, Twitter currently powers thousands of small businesses via it’s API. It’s a whole ecosystem reliant on the host. If Twitter doesn’t get a similar valuation to Facebook, I’ll be investing.

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  1. Oye Reply

    I agree with all your points, especially point 3. Social media is just the evolution of media into a faster, friendlier (and mostly) freer format.

  2. 40deuce Reply

    To go along with your 3rd point, yes media is old and this is just an evolution of it, but the same can also be said for being social. People were being social (talking, sharing stories, etc) for long before media of any kind was even invented. Media has always help the way we socialize to change from writing (letters, newspapers, etc) to the telephone and now to the internet.
    While business models and technologies will always change, the need and want of humans to be social with one another will always be there.

    Sheldon, community manager for Sysomos (http://sysomos.com)

  3. Anonymous Reply

    Interesting… I’m not sure I’m convinced but I’m sure it’s not going away anytime soon. If anything, social media will continue to evolve and take new surprising routes, particularly with mobile adoption. I like Sheldon’s point about our need to be social ; it’s what makes my job great 😉

  4. Luke Brynley-Jones Reply

    Thanks for your input folks. I may have over-egged it a little – but I get irritated when people de-value social media as some kind of dot com frenzy. The dot com bubble was based on hype. Our growing appetite for social media is based on measurable value. There’s a big difference.

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