Is social media investment a bubble about to burst?

The Daily Mail certainly hopes so – clear HERE to read its gleeful article comparing the situation to the dot com boom and bust of the late 1990s.  In short, as originally reported by Bloomberg, only 2% of venture capital destined for internet based companies went to social media start ups in the last quarter compared to 6% in the two years up to mid-2012. Back in the third quarter of 2011, social media companies led by Twitter accounted for 21% of venture capital.

Having gone from 21% to 2%, the Daily Mail has extrapolated a dot com type crash while Bloomberg more soberly notes that the air has been let out of the balloon in a slow and measured fashion.  I tend to favour the latter analysis. In place of social media, the new buzz words are data and the cloud. And that’s surely a good thing. Far from signalling the death knell of social media – as some old curmudgeons may be hoping – it simply shows that the market has recognised that enough is enough. There are new toys to play with and we have our fill now of social media sites.

In researching this little blog post – I found an online article written back in 1997 comparing Microsoft’s share performance to RCA (Radio Corporation of America) ahead of the 1929 crash.  Radio stocks were among the most inflated shares before the Wall Street collapse that heralded the Great Depression.  You can read the article HERE – yet it must be pointed out that Microsoft is still very much with us while RCA enjoyed a long and distinguished history until disappearing in 1986.

So anybody hoping that the drop in venture capital investment in new social media companies betokens some apocalyptic crash of the social networking giants may be in for a big disappointment.



One thought on “Is social media investment a bubble about to burst?

  1. I think that we’re at a point where adding another social media platform would be extreme overkill. The major platforms are well assimilated into their places and have a nice hold on their main targets and functionality… Well, maybe minus Google+? I think we may begin to see a resurgence of tools to really hone on tracking engagement. Will we ever be able to truly define the ROI of social media? Who knows, but I think now that the firm groundwork of social media sites is set, there is opportunity to explore new terrain. What do you think is next?

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