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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.
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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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.
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?
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.
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.
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