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Social Media Bubble Pops Before It Fully Inflates
bdking writes "Groupon's IPO plans are melting down. Facebook has pushed back its IPO to next September. And now Zynga reports a 95% reduction in sequential quarterly profits. So much for the social media IPO bubble."
At least everyone is getting let down before a lot of people lose a lot of money this time around.
Even Slashdot isn't getting any replies
Really? What next, Slashdot = Search Engine?
What's zynga, never heard of that
this is not surprising. i wouldn't blame it on a social-media specific bubble just yet since this is only reflecting the problems with overall growth of the (world) economy.
Was kind of funny seeing Zukerberg feeling the heat on his ass last week. Too bad he will have to accept to be just another rich man now unless some unlikely hit comes....
I was rather looking forward to shorting them.
I heard Farnsworth say "GOOD NEWS EVERYONE!" before reading this article.
Nothing makes a good headline like massive amount of "revenues" or "profit" decreases - except both metrics can be totally worthless unless you look into details.
YAY!
People who were trying to attach a value to social interaction were idiots to begin with. There's a fine line between marketing things that people are interested in and shoving ads down their throat. The problem with social networking is that you can't piss off your target audience as much with obnoxious ads. Marketers for some reason thing the more obnoxious your ads are the more people see them.
People are have gotten tired of those stupid games.
Facebook is making money and a lot of it.
Groupon. I used it once of movie tickets. People can only go out to eat and got to the spa so many times.
I don't think it is too much of a bubble. Much like the first time around the good will survive the stupid will die off.
Of course you should come to my new social media site. It is for people that are in deep emotional relationships or want to seek relationships with one eyed Episcopalian kangaroos. I am pretty sure it will be the next big thing.
Fetish courtesy of Neal Simon's Goodbye Girl.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
Groupon is not a social media website by most definitions of that term. Zynga is a single one of many companies profiting from Facebook. Pushing back the Facebook IPO is not a reason to think that the bubble is bursting- indeed if they thought that they'd want to go and do the IPO sooner rather than later. The Zynga and Facebook issues are also probably to some extent due to a new player entering the field in terms of Google+. It does seem that the social media sites don't remain on top for very long. Myspace is dying, and who even remembers Friendster? But it does seem that the industry itself is here to stay. We may end up seeing something similar to what happened with search engines- successive stages of different companies until someone got the product well enough to dominate the market (a long with a healthy dose of early mover effect compared to new rivals). Whether that will happen or not is hard to tell. But declaring that there was a bubble in this context when most of the relevant companies aren't even being traded actively is really difficult. Declaring that the bubble has burst makes even less sense.
Even the most computer illiterate among my friends and family are starting to talk about privacy invasion, enforced sharing, and lack of control over their personal information. Facebook's "ticker" has created a new world of raging confusion. The anti-social networking mentality is hitting the mainstream..
Better would be "Predicted social media bubble fails to materialize". A bubble is defined by its inflation; a bubble that "pops" before it "inflates" never existed in the first place.
The market and the investors have evolved, almost a defense mechanism, against shitty companies and IPOs. This is nothing more than a population of educated investors.
I want to delete my account but Slashdot doesn't allow it.
Damn. I thought that Zynga's bubble was going to pop, but not this soon. There are only so many Farmville type games anyone can play, and I can't be arsed to build my life around clicking some field every 4 hours without getting paid.
Yes, this is just a year-over-year quarter comparison, and there are a few things that were playing against Zynga in the last few quarters. Not the least of all that a lot of real game companies are getting into the FB game business. Zynga won't be able to just rip-off some game mechanics and then throw some eye candy on top of it. They'll actually have to develop real games.
Welcome to the real world, Zynga. No one except your founders is going to make bank on your stock.
Those who can, do. Those who can't, sue.
I must be jaded.
I must have been around a bit.
I must be a thinking human.
It surprises me in the least.
The barriers to entry in these fields are so low I can't figure these absurd valuations of social media - people on the internet are not just fickle, they're extreme fickle - since there's nothing really to hold them anywhere, not much of a stake.
Now eBay, they're still successful no matter how badly they handle their business, because everyone goes there because everyone is there and no other auction sites have really stuck around to compete with them. But social, who's really nailing their cart to any Social Media horse? Google+ pops up and everyone creates an account, just in case everyone else goes there.
We knew this phenomena back in the days of Fido BBSes (and even before that with message systems on college mainframes in the 1970's.)
A feeling of having made the same mistake before: Deja Foobar
They'll get out of this without LEARNING something.
And are way more likely to repeat the mistakes. Again.
Whenever I see a new Zynga games advertised I immediately hear a twisted version of Boomhauer in my head:
Yeah man, I tell ya what, man, that dang ol’ Zynga, man, you just go in on there and point and click, talk about w-w-dot-w-com, mean you got the chicks on there, man, just go click, click, click, click, click, it’s dang ol' easy, man.
You say things that offend me and I can deal with it. Can you?
I wonder if online pet food stores are coming back.
Lets get ahead of the curve. Last tech bubble resulted in all kinds of jokes. This tech bubble is going to result in jokes about... Or will it be more complaining, like this bubble will be nothing but whining about how facebook sucks, etc?
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
The money for the last New Economy bubble was created to counter measure a previous bubble collapse. The fed reduced the interest rates to pump more dollars into the market. That worked perfectly. And the money had to go somewhere. And that somewhere was the New Economy. This time they burned the money in that finance crisis and housing thing. And reduced the interest rates again. However, this time the economy is in such a bad shape due to the financial crisis and the money problems in the Euro-zone and of course the trouble with the US budget keep the banks from "investing" so IPO for the web 2.0 companies is not such a good idea at the moment.
Yes! Finally! Hopefully all this social media crap will die off soon. And my later prediction was correct, Groupon was the first to go.
"When information is power, privacy is freedom" - Jah-Wren Ryel
Sucks to be you. Assholes! You deserve to fail. If I ever see a former Zynga coder or QA person come through my door looking for a job I WILL have you thrown off the premises bodily. Yours All the people you have ripped off, falsely accused of cheating with no proof and otherwise slandered.
Unremarkable:
1) GroupOn is crap, was going to fail away.
2) We're at the start of a "double-dip" recession or worse; everyone at the Fed is screaming about "no investment;" interest rates have been lowered etc but experts say this will move only a few investors, in highly secure investments... ie, "what Bubble???", no one's taking high-risk investments.
I guess now that Taco's gone, article quality is going even *further* downhill.
But this time, it was the VC's, private equity, and angels who are holding the declining valuations, not the post-IPO institutional and retail investors.
About time they stop tossing hot potatoes to us -- they finally got burned!
Be very, very careful what you put into that head, because you will never, ever get it out. -Thomas Cardinal Wolsey
The definition of "social media" varies but generally speaking the word implies online service that is centered around the social relations between the users. Social media builds on who you're interested in, not on what you're interested in. It's based more on the amount of communication as opposed to the content of communication.
For example, Slashdot isn't social media because I come here for the content (articles and the information and opinions found in comments section). Facebook is social media because I go there to see what people I'm interested in are up to - the content of our status updates and comments hold no value at all but rather the fact that we communicate and the metadata of the communication (tones, etc.) are what matters. Some services (Messageboards, IRC, etc.) CAN be used for communication that contains useful information and they CAN be used just for building and maintaining social relations. Generally, a service isn't labeled "social media" unless it is in some ways been clearly designed for that purpose (FB is clearly built for that purpose, IRC can be used in somewhat similar ways but hasn't been specifically designed around that).
Groupon does have some aspects that could technically be called "social" but they're not what the word meand in "social media".
Facebook is - or soon will be - flailing at the wind. Fighting an opponent they can't hurt.
Facebook is now facing a competitor that can afford to earn $ 0 from social media.
Facebook's survival depends on the popularity and eyeball count of Facebook to sell ads and revenue share (Zynga) agreements against.
Google, currently earning as much profit per month as Facebook earns per year, does not need Google+ to earn three cents in order to continue flourishing. While they would LIKE Google+ to be a runaway hit, it simply isn't necessary.
Once Google starts aggressively advertising Google+ on television, stealing 10, 20, maybe 30% of Facebooks' traffic, how will Zuckerburg feel then? Probably like the guys at Netscape after Microsoft purchased Mosaic, rebranded it as Internet Explorer and started giving it away for free.
Facebook's UI is a mess, it's privacy and security settings are not intuitive and the entire user experience feels stale and worn-out to many people I've talked with. The massive redesign that Facebook is preparing to launch, with Timeline and other UI tweaks.. while satisfying some, will probably feel like "work" to many - something new to learn, for what was supposed to be a simple, fun way to keep in touch with friends.
If Google has half a brain, they will ascertain the date of Facebooks' relaunch and start a massive national ad buy for Google+ starting two days prior and run a solid week after. Clean, simple, secure microblogging with video and photo photo sharing. They will steal millions of users.
THIS SPACE INTENTIONALLY LEFT BLANK.
1) GroupOn is crap, was going to fail away.
AdDing random capiTal letters inTo comPany names doesn't make you sound aNy more knowledgeAble about them.
Except that their revenues are actually UP. They bought a lot of stuff and hired a lot of people. Profit money taken in, it's money AFTER you paid for everything they are doing. So, as of now, they are quite sustainable.
Is there anything better than clicking through Microsoft ads on Slashdot?
This is all virtual land in cyberspace. Value it as you dare. Both the MySpace debacle and the Dot Com Boom/Bust are still near enough in most people's memories (and investment portfolios) to sing the song, "Won't be fooled again."
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
At least maybe Mark Zuckerberg won't be such an arrogant asshat a year from now.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
The main problem with Groupon is the "deals" suck so badly for businesses that once they've burned through all good will in a region the only way to keep generating revenue is to expand into another.
I would actually be embarrassed to use a GroupOn coupon, knowing how much it was shafting the business in the process. They get what -- 25% -- of their normal price, while GroupOn keeps another 25% for themselves in the half-off price? I truly feel sorry for the businesses who have been convinced to go this route.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
The social media bubble has not burst yet. When it does, you'll know, because it'll be bloody. Old coworkers will get into online arguments about politics. Suddenly everyone will de-friend everyone else and stop logging in all together. Old school chums from 20 years ago will meet each other in person and start trying to bump each other off. Farmville crops will go to fallow. Pretty soon, the government will be forced to take action.
Oh noes!
The bubble of /. article quality is going to POP!
Everyone, make sure to sell short and submit the worst that you can!
This is what they deserve. They took their chances.
... now back to the bit mines.
there is the 'future earnings booked to present' bonus
there is the executive who leaves to start a hedge fund golden parachute
there is his right hand man who leaves with him golden parachute
there is the bonus payed to the executive committee that looks for a new executive to fill his spot
there is a hiring bonus for this new guy
then some more golden parachutes and hush money when a couple people leave because they find him snorting coke in the boardroom
then there are the bonuses for performance increases
then there are the bonuses for paying out bonuses
etc etc etc.
I find it hard to believe owners believe that they own a rock solid idea or product rather than the latest fad. It must just be greed that keeps them from selling when there company reaches say 50 - 100 mil per person (they certainly don’t need any more).
As do most here I don't believe these companies are worth much more than 2 to 5 times their yearly profits as with risk added your aren’t likely to see much more back and that curve that looks exponential is just nearing the peak (as the sum of a lot of one off pulses wear out).
One of the problems with Facebook is that most of your friends are people you already know and in many cases, people you haven't seen in years. There is a huge void which is trying to meet new people.
The other problem is the youth. I was a teen in the late '80s and if my parents knew what I was really doing when I was 15-18 they would have thrown me out of the house. Teens today want no part of a social network of parents, aunts, uncles and good grief, Grandparents!?
A "friends" network like Facebook benefits from being the largest. It is still a player. Ditto Linkedi-n in the business realm.
Groupon is an easily copied and implemented concept. Being first or largest doesnt help a whole lot. My local newspaper does a groupon-type promotion daily.
Lot of people interact on web virtually since, they have less time to interact personally. Obviously, there is bubble in social media websites but economic downturn is also a grave concern for US, Europe and then OPEC Members of Middle East. Economic melt down is also the reason that IPOs are being postponed and business houses are waiting for pleasant environment to float their Shares.
vishal dogra
The cloud is the next thing to go, as people are realizing they have these great persistent network connections to connect to the cloud with that are, incidentally, a great way to connect the cloud to data they host themselves on their home computer. Add in the magic of the cryptographically secure hash and you have a fully functional mesh network (i.e. social graph) in the application layer, no privacy issues, no spying, just control. I mean, the whole reason the cloud was appealing was it was easy and you didn't have to hassle with the computer (well, you did, but you didn't have to install anything at least). But now, I see this Windows 8 Share feature, where you can like, copy a picture to your friend's clipboard with 1 click, and it doesn't seem like the cloud stuff is really all that necessary. Especially with the hash routing ideas present in things like bittorrent, DHT, and of course the diaspora social network system. I mean, that does away with all the confusing ports and firewall stuff pretty handily, so like I think it's time to bring it back home.
What IP outside of their game artwork does Zynga actually own? I mean what is stopping a competitor from coming in a scooping up their business? Do they own any patents? (Hint: The answer is none) So what can they do to protect their market position? Nothing
Tell that to Rupert Murdoch.
Typically the deal has tipped before I even open my email in the morning. It's in no-one's best interests to have the tipping point very high - Groupon doesn't want a deal to fail, they get no cash!
For the six months ended June 30, 2010 and 2011, our revenue increased from $231.0 million to $522.0 million, our bookings increased from $373.0 million to $561.3 million, our net income decreased from $20.4 million to $18.1 million and our adjusted EBITDA decreased from $187.3 million to $177.3 million.
It looks like net income dropped 10% (to 90% of what it was), and EBITDA dropped by about 5%.
How that translates to a 90% loss in profits I'm not quite sure... Seems like it's a drop TO 90% of what it's profits were - a 10% reduction, not a 90% reduction.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
This would explain the recent spamming and in your face advertising within various Zynga games.
I used to play mafia wars until the advertisements which popped up every freaking time I tried to change the section I was in.
I used to play vampire wars until they started spamming the gifts and buying stuff (which used to crash the game every so often).
I used to play farmville till the game decided that it didn't like saving anything that I did (not to mention the ridiculous amount of cpu time and memory that it chewed up on the lowest settings).
I currently play cafe world but the amount of in the face advertising is really off putting and it only started a week or so ago. Hell, they are losing players over it daily now.
FWIW, I only play the games because my wife likes to play them and she gets me to play them to help her out.
If you are on gmail, you are one click away from google+. If you are not on gmail, you are unlikely to have friends, stalk targets are NOT friends you hotmail user.
Oh and MySpace is very interested in your theory and how they still lost their entire userbase to facebook.
MMO Quests are like orgasms:
You may solo them, I prefer them in a group.
I would actually be embarrassed to use a GroupOn coupon, knowing how much it was shafting the business in the process. They get what -- 25% -- of their normal price, while GroupOn keeps another 25% for themselves in the half-off price? I truly feel sorry for the businesses who have been convinced to go this route.
The problem is you (and many others) don't understand what a Groupon should be.
For example, I bought a groupon for 50% off a winery tour. The tour resulted in a purchase of a case of wine from the winery. While I'm sure not everyone on the tour bought that much wine, the groupon got the winery exactly what they wanted: Lots of people in the winery at an off-peak time that they could then up-sell to. For them the groupon worked very well.
Groupons are not right for every business, but they can work very well for businesses that have low marginal costs, especially if set up to bring in business during off-peak times.
paintball
It was fresh at one point, but for me the charm wore off when I realized it was essentially a much better version of software the IC and military uses to create a pattern of life for high value objectives, so I quit last year. Not that I think my profile is gone, mind you.
For the somnambulant masses, it has simply gotten boring. A chore. How many times at parties do I hear people say "why didn't you reply to this PM", "check Facebook to find such and such directions to a party," "oh god I am so behind on Facebook", ect.
How one can fall behind with respect to Facebook remains a mystery to me, but apparently it can happen.
I am very small, utmostly microscopic.
Why does everything have to have a big IPO to be considered a "success"?
I understand that private corporations are "bad and evil" from a governance perspective. (not that having public stock changes governance. That often makes the moral-hazard situation WORSE - - lots of money, and NO real moral hazard).
The benchmark mythology of the "successful innovative dotcom" arose out of the late 1990's; and the accompanying horrid deregulation of the stock-market. At the time, I watched co-workers as they OBSESSIVELY monitored stock prices on a continuous basis, at their desktops. They ignored analysts on news shows, and in articles, who talked about "traditional P-E ratios" - and instead, believed in what they wanted to believe: That this was a "new economy", and that the dotcoms were DIFFERENT, and that the old rules no longer applied. No seriously. The pundits started saying this, as P-E ratios shot past 20, to 100, and higher, and prices kept going up and up, and people started talking about retiring on UN-OFFERED OPTIONS, in their mid-20's.
This bubble, and accompanying IPO boom; we'd like to imagine it was because the internet was awesome (well, it WAS!) and that computer geniuses are awesome (we ARE!) and it was the time of the revenge of the NERDS dammit! (well, no, not really . . . ) this was really all a big pump-and-dump scam, designed to remove excess wealth from the middle-class.
You go back to your major index graphs. DJIA, NASDAQ, S&P, and scope them out from 1996 to present day. If you look at stocks through the lens of traditional P-E ratios, through the recent summer-of-2011 crash, they are FINALLY getting back in-line to where they *should* have been. The bubble kept them over-inflated for about 15 years. There were some exceptions. Apple. Google. Microsoft. This was *hype* that was robbed from much older, larger companies that have been sucked dry. DEC, HP, SUN, IBM, etc.
Facebook does not need to have a "big IPO" to be successful.
That was the "big-lie" of the Enron age. It allowed a few very wealthy investors to cash in. It allowed some of the best innovators to cash in. Some of the others, who weren't already independently wealthy, from the anecdotes I've heard - they diversified and sheltered . . . and tried to dodge the crash in 2000-2002. But most of them have lost most of the huge IPO fortunes they made in the late 1990's.
The gig was really "up" when Enron crashed - - - but there were still plentiful suckers out there for the IPO market. Why not - there's one born every minute. The money hasn't dried up, because the FED keeps printing more and more. They spewed it out through the home-mortgage/bankruptcy industry, right up through about 2005-2008, when the change in bankruptcy laws and mark-to-market rules began to force the market back into some semblance of sanity. The result? An economic armageddon, and a several-year adjustment in pricing to reflect the actual reality that is being forced in the credit, commodities, and securities markets by the new rules. There is still more adjustment to come, of course. Watch for a gold-crash, real-soon now.
So - whether Gropeon, or Faceplant have an IPO really has FUCK-ALL to do with whether they have successful business models. We can't just magically create money and hand it out to everyone - because it will create bubbles, (or "managed inflation"). And we can't then, just funnel all this newly created money to a few individuals, because that creates class inequality, and completely fucks up our political system (as we're watching happen over the past 3 years) - which has a serious potential for violent revolution. Which is not a prosperity-creating proposition, for anyone, in a civilization that has nuclear weapons.
We seem to have solved the problem on the regulatory, and fiscal policy side. And, I think that the business/industrial side of things has got this figured out. Zuckerman has created a nice prospect, and built it up, and no, it's not perfect, but it sure as
These are my friends, See how they glisten. See this one shine, how he smiles in the light.
When I go to an event like ASSEMBLY I join the appropriate IRC channel of about 500 people. Not only do I not know most of them, I don't know who is dating who, who is friends of who, which of them have similar interests with each other, how active certain people are in interacting with each other, etc. before I explicitly get to know them and find out things like this manually... And this is all OK, as IRC isn't a social network.
I can't easily monitor my social circle (friends, family, co-workers, etc.) through IRC: Even ignoring that most of the people I know aren't on IRC, IRC is built around channels, not around social relationships. Not all of the people I frequently interact with are on the same channel (indeed, I would need to be on all the channels they're on)! I would need to analyze the backlogs of 30 different channels to piece together the data about the people I'm interested in, etc. which simply isn't practical (or possible).
Like all communication mediums, IRC can be used to build and maintain social relationships. However, it obviously isn't designed for the type of stuff that social networks are designed for. It's mind boggling how someone could not see this difference. :)