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.

Comments

Overly dramatic headline

[DragonWriter]

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.

Re:Overly dramatic headline

[NeutronCowboy]

I would argue though that Goldman Sachs creating an investment tool that trades in Facebook pre-IPO shares, and having that investment tool value FB at around $50 billion is a pretty damn strong sign of an actual bubble.

Re:Overly dramatic headline

[m50d]

If you're buying it not because it's worth that much but because you think someone else will pay more for it, that's a bubble right there.

Re:given the state of the economy,

[Toonol]

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.

Flailing at the Wind

[Scot Seese]

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.