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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.
I was rather looking forward to shorting 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.
Then would you care to enlighten us, O Wise and Powerful AC? Zynga's quarterly profits went from $22m to $1m in a quarter, and thanks to the SEC we've discovered Groupon has never made a profit at all. But please, tell us why these metrics are worthless and these companies are still hot stock picks.
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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.
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.
Uh.. the whole economy crashing thing was years ago now. I doubt this is related. It does sound more like people just finally got bored and moved on to something else. I'm not sure what, but I'm glad there won't be so many of those stupid predictions about how gaming inside your web browser is "teh futurez!". It has its place, but that place isn't replacing consoles any more than the Wii's motion controls got rid of game pads.
There's a big difference between "infinitescimal growth" and "95% decrease" btw.
which is totally what she said
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
I'd blame it entirely on the bubble, and irrational valuation. It's not the recession's fault that Groupon's value to decreased from a trillion+ dollars... it was never worth that to begin with, and wouldn't have been even in a healthy economy. Nothing real about Groupon or Zynga has changed that caused their value to decrease 90%; those sorts of swings are entirely driven by the worst type of speculation.
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?
Nothing real about Groupon or Zynga has changed that caused their value to decrease 90%; those sorts of swings are entirely driven by the worst type of speculation.
I doubt that speculation reduced Zynga's profits by 95%. Either their costs have soared for some reason, their revenues plummeted or their books were just plain wrong. Or a bit of two or more of those.
To summarise the summary of the summary: people are a problem. ~ h2g2
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.
The "social" aspect is that a certain number of people have to sign up for a deal before the deal becomes active. If a preset limit isn't met, nobody gets the deal. People tend to use social networks such as Facebook to spread the deals and encourage other people to sign up. So Groupon is kind of an adjunct to social networking sites like Facebook in the same sense as Zynga is (Zynga only exists because of Facebook).
Breakfast served all day!
From what I've read, Zynga's revenues rose 115%, but profits dropped 90%+.
http://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/09/zyngas-90-drop-in-second-quarter-profits-unlikely-to-derail-ipo.html
According to that article, their costs went up a ton due to development of two new games that have yet to make them money. I have a hard time swallowing the article's claim that a 90% drop in profits isn't something to be alarmed about.
If you can't convince them, convict them.
It's really tough to make a case when you don't have a set of three.
OK, then: The ongoing meltdown of MySpace, which was bought by News Corp in 2005 for $580 million, and was sold in 2011 for $35 million.
Breakfast served all day!
Nothing real about Groupon or Zynga has changed that caused their value to decrease 90%; those sorts of swings are entirely driven by the worst type of speculation.
I doubt that speculation reduced Zynga's profits by 95%. Either their costs have soared for some reason, their revenues plummeted or their books were just plain wrong. Or a bit of two or more of those.
I think early speculation on a Google buy out of Groupon propelled their valuation to irrational heights. Reality has been reasserting itself, in a way very reminiscent of Terry Pratchett's Mort, upon Groupon. I thought they had a marginal idea, at best, when I first hear their business model, but I'm just a nobody who said people should be buying Ford stock with every dollar they can lay their hands on, when it was at 89 cents a share in early 2009 (even at today's price of ~$10 a share that's a pretty nifty return.)
A feeling of having made the same mistake before: Deja Foobar
I think of them more as slot machines for the internet age.
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According to that article, their costs went up a ton due to development of two new games that have yet to make them money. I have a hard time swallowing the article's claim that a 90% drop in profits isn't something to be alarmed about.
Sad but true. Short-sighted investors that are alarmed when executives put profits back into the company instead of dolling them out as dividends are what make so many CEOs drive perfectly good companies into the ground. They should all have their man-cards revoked and sent to business school.
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".
Not sure if you are trolling or what, by Zynga is a huge gaming company mostly propped up by facebook. Some sources say that they are bigger than EA.
Well i guess not anymore :P
As a potential lottery winner, I totally support tax cuts for the wealthy
Regarding Zynga, how about doing as suggested and read the details? (I won't comment on Groupon, as I've never believed in their product at all)
Their quarterly revenue actually went up by more than $30M over the previous quarter; $279M vs $242M. They didn't launch a new game the entire year, until May 31st. (one month before the end of Q2) Since then, they have also launched a new Indiana Jones themed game, Adventure World. Keep in mind that Zynga will be one of the early players on Google's new social network, already launching their biggest game, Cityville, on the platform.
They had higher than normal hiring expenses, including a $10M payment as part of an executive's sign-on bonus. They also paid out $10.6M in a stock warrant. Both of these are quite likely to be one time events, and neither of them made many appearances in the media. If you take those two payments out, you are back at ~$22M in profit, which would be an increase in year over year, and almost double Q1 2011's profit of $11.8M. My source outlines most of this for you, in case you'd rather not read through the details yourself. I knew the Q2 2011 profit number, but here is another source for you to check out in case you don't believe me.
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.
Marketers for some reason [think] the more obnoxious your ads are, the more people see them.
Why's that at all surprising? It's true.
I've sworn off buying stuff because of egregiously offensive ads many times. Slapping me in the face repeatedly with boneheaded marketroid pitches just makes me look harder for stuff I don't want and will never buy. I was just telling a friend last night why I'd never buy an HP laptop again, and why I won't buy Intel based boxes, and why I've not been inside a McDonalds in more than a decade. Their ads remind me repeatedly of all the things I hate about them!
Marketroids' pitches more often drive me away from (not toward) making a sale for their principals.
It's a fun game. I really wonder why they want to play it. They can't win that game, except they can (because there's a lot of morons who do buy !@#$, regardless of what I think of it).
"Tongue tied and twisted, just an Earth bound misfit
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.
Are you prepared to do that yourself? Most McDonald's locations don't have security personnel on-site.
"I like to lick butts!" by MobileTatsu-NJG (#32700246) (Score:5, Informative)
Groupon just doesn't work for me. I live 40 minutes east of Atlanta(which has a very spread out metro area).
90% of their deals are for crap I would never buy(nails, massage, spa, etc.). Occasionally they have a 1/2 price meal deal, but they are all 40-60 miles away. Am I going to drive for 2 hours to save $15-$20 on a meal? Would you?
Maybe it works better for those living in more urban areas.
It's a pretty good idea, but $1 billion IPO. I'm not buying that bubble.
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!
Doesn't it have a feature where if you buy something and then get some number of friends to buy it you get it for free?
Another spin on multi-level marketing, AKA a form of ponzi scheme...
Actually just a general pyramid scheme. Ponzi schemes may be famous right now, but not all investment frauds are ponzi schemes.
In a pyramid scheme, each new investor has to get new investors for himself to create value to his own investment. A club that costs $30 to join where each member gets $10 for each person they invite is a pyramid scheme.
In a ponzi scheme each new investor adds value to all the previous investors; consequently, fewer investors are needed. That's one reason ponzi schemes are so much harder to find. An investment firm that pays older investors with the money earned from newer investors, rather than from external investment into something like stock, is a ponzi scheme.
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.