Is the Social Network Bubble About to Burst?
The signs of a dot-com bubble burst were all over the place beginning back in 2000.
Unfortunately, most of us had tunnel vision and failed to see those signs.
Looking back, there were some really bad Internet-based businesses with no real way to make money. Yet, investors still gave them money just to try.
The reason was that some Internet-based companies had sound business models and stocks their were flying high. Everyone else thought they could do the same thing. They too wanted their own little slice of E-cake at the party. Unfortunately, just because a business wants a stake in a popular trend doesn't mean it's going to make any money. Investors never really noticed that these companies had no sound business model.
So are we in a social networking bubble now? Are we throwing good money just to get a slice of the Facebook-cake? To answer that question, let's first look to the past at two dot-bombs from over 10 years ago.
First up is iHarvest. This company developed a browser plug-in that allowed users to download and store copies of web pages on an iHarvest server. The only problem was that most web browsers back then already let you download them to your desktop for free.
Or how about pets.com? This companies idea was to corner the online pet supplies market. Unfortunately, there was no online pet supplies market to corner. No flashy advertising campaign (sock puppet) could save pets.com from tanking.
Getting back to the latest possible bubble. I'm beginning to see some really bad ideas from reputable companies simply as an attempt to cash-in on the latest social networking craze. Take Pepsi and their new social networking vending machine. Customers can use the Internet to send a Pepsi "gift" and a personal message to a friend. Their marketing tagline is "Random Acts of Refreshment". Cool catch-phrase, stupid idea. Who would actually use this?
I'm sure you can think of several other social networking gimmicks that don't stand a chance. While there are certainly still money-making opportunities out there, some companies are attempting to cash-in with some poorly thought-out plans.
That is why it is not surprising to read the news that even Facebook investors are looking to get out quickly before the bubble bursts. When the originating social network investors are looking for the door, perhaps we should all take that as a sign to stop throwing good money into a declining market.