The Social Media Bubble: WIll it be a Cold Snap or an Ice Age?

What if the social media party is over? How will we know the difference between a cold snap and the social ice age?

The Microsoft anti-trust verdict in 2000 popped the DotCom bubble. Until then, there was exuberance and confidence. Everyone wanted onto the Internet bandwagon and investors pumped in the money. 

The Fannie-Mae and Freddy-Mac bankruptcies were the dead canaries in the coal mine before the housing bubble burst. The Dot Bomb in April 2000 was preceded by the NASDAQ tech stocks going into a descent from their pinnacle. Sometimes the delineation of pre-bubble to post-bubble is clear. Sometimes, the pop is less obvious.

Facebook is the Big Daddy of social media. Facebook’s IPO launched at $38. High profile companies often see their stock value shoot upwards, but Facebook deflated. Groupon was a darling, once rumored to be worth $6 billion to Google. An IPO of $20 and a peak of $26.11 last year has crumpled into less than $5.

Beyond stock price woes, Facebook’s membership numbers could be bloated with dormant and bogus accounts. Groupon’s value proposition to retailers has eroded from a number of horror stories. Corporate buy-in is key for survival as consumers are used to free websites. Someone has to fund these websites and that usually falls to advertising from businesses.

Mass media can scale to be a global force of influence because it speaks without waiting to listen. Social media works best when the producers and consumers interact. People engaged in social media often speak with their tribe of friends. The corporate deployment of groups and pages means that people accept businesses and organizations into their Facebook tribes when corporations try to sell via social.

The big players of social media are not open standards like email or the hypertext protocol: they’re websites like Twitter and Facebook. The Internet was designed to be pernicious and supposedly immune to a nuclear attack. The Arab Spring demonstrated that countries were able to shut off local access to Youtube, Twitter, Facebook, etc. by blocking access through as select number of service providers

Imagine if your email—the capacity to send email and its storage—could wink out of existence? That’s the potential of what could happen if Twitter or Facebook should fall as your connections, posts and personal messages are stored inside of their infrastructure.

Problems face social media’s marketplace viability: scaling reach is very different; marketing campaigns can get subverted; anyone can become as popular as a big brand; and the control of the user content is problematic. If the monetization of social media is unstable, then it’s vulnerable. 

Many businesses are still eager to woo customers via social media. Ventures into social media have to pay for themselves. If a business spends $50,000 per year on one social manager position, or if they spend it on a number of staff who share the social media workload, then that outreach should bring in at least that $50,000 per year in new revenue, otherwise it’s wasted money. Some businesses are diving into the depths of social media, while others have either eliminated or diminished the role of the social media person at their company.

Is the lack of stock market love a sign that social media could be in trouble? What if the investors of Twitter stop waiting for Twitter to become financially popular and turn off the taps? What if Facebook’s stock jolts downwards and gets snapped up in a fire sale that pits Zuckerberg’s majority of shares against hostile stockholders and financial pressures? What if the chill on social media comes from corporations and organizations that opt to not use advertising and premium services, as GM did when it cancelled its Facebook advertising?

Would the next dead canary be massive social media staff cutbacks—layoffs of social media liaisons in small outfits and downsizing in the big startups?

The hindsight on burst bubbles is usually 20/20, so we may look back and name some event as the time when social media started to go cold.