Lately, it seems that pundits of every stripe are concerned with the nature of the current "social media bubble" and when, not whether, it will burst. No surprise there. Many fads, crazes and social movements seem to belong to boom-and-bust cycles. As such, they are somewhat predictable and depressingly regular. I say depressingly because an ability to recognize a "bubble" does not necessarily mean that one can concurrently predict the date of its rupture or, more importantly, the extent of its aftermath.
Humans try to predict the future in order to control it, in order to control their own destinies. But such control is an illusion, which is why futurists have such a lousy track record. Looking back in history is supposed to be a better guide. As such, with the social media anomaly, it is tempting to draw an analogy to the Internet bubble of 2000 which, as I recall, ended badly. Lucky us.
Back at the turn of the 21st century, there were hundreds of start-ups that were apparently awash with cash that came from a seemingly unlimited number of venture capitalists and equity investors. Many of those companies did not have a workable business model, but that did not stop investors with borrowed money from buying certificates of stock that, in reality, were lottery tickets. Some companies got very rich. The rest? Not so much.
To be honest, the sole reason for the existence of these companies was to make gobs of money. Who needs a business model when you have an exit strategy of going public and transferring all of your business risk to the shareholder?
The bubble eventually burst when the markets came to the realization that the conditions for maintaining this paradigm could not be sustained. Billions of dollars in equity evaporated within a relatively short time, revealing the true problem: the boom cycle was just an illusion. The crash was loud and sobering.
These conditions do not exist today, though. There seems to be no illusion about the current crop of social media companies. With the exception of the larger social media companies, such as Facebook, LinkedIn, Twitter and the like, most of the companies are bootstrap affairs that are self-funded and, in some cases, getting by with an occasional infusing of cash from angel investors and private equity concerns. The exit strategies are also different. Instead of hoping for a successful IPO, these companies are angling to be bought by Google or Facebook or Twitter, or some other going concern that can turn abundant user data into gobs of cash, an elusive and inscrutable process that is called "monetization."
So, when will the social media bubble burst and what will be the outcome of that event? I maintain that there was never a bubble; at least, not in the sense that we call any market conditions a "bubble." Today, there are no over-inflated, wispy corporate evaluations that threaten to come crashing to earth and ruining someone's 401(k).
Instead, we have a dizzying number of scrappy, underfunded and privately-held endeavors that have started poor and stayed that way. There is no real bubble here because there was never any inflation in the first place. Having skipped the boom and starting from bust, these companies hope to recoup their investments somehow, some way. I wish them luck.
If some of these companies went out of business tomorrow, would anyone notice? I don't think so. So many of them are redundant in an attempt to fill the same need and to achieve the same outcome, which is to provide marketers and sales types with data on our behaviors -- a process which may or may not affect our collective and individual sense of privacy.
But that is a different conversation.
So what do you think? If some of your favorite social media sites were to disappear, or be absorbed by another company, would you notice? Would it affect the way you interact with friends and family? Do you have a limit on how many social media sites you sign up for? Is there room for more social media sites and are you willing to spend another Friday night living online?
I'm maxed out on social media. I may make some trades along the way. I'll absolutely continue to participate. But I'd like to sleep once in a while or even have a real chat in person!
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