2011 – The Year Social Media Bubble Will Eventually Burst

by    |   24th Jan 11 2:11 am   |   35



Social Media Burst e1295859864322 2011 The Year Social Media Bubble Will Eventually BurstEver since the beginning of New Year, I’ve heard the “social media bubble burst” claims several times so I couldn’t resist the temptation of writing a piece on it sooner than later. Social media critics believe that year 2011 will spell doom’s day for Facebook, Twitter and other well known social networks. While some of them argue that social media has outlived its expectancy, others believe that social media has grown too fast and is no longer a sustainable proposition amongst individual as well business users.

I witnessed the 2000 dot-com bubble and being a social media loyalist, I can safely bet that Facebook and Twitter aren’t going that dreaded route. Investors have questioned the valuation of Facebook and Groupon and it’s surely the beginning of the end for Myspace. So, are these good enough reasons to doubt the long term future prospects of social media? Let’s dive in.

Dot Com vs. Social Media

First thing first, it’s grossly unfair to compare the dot com bubble with social media. The dot com bubble was all about businesses and individuals going gaga over their newly found fame and attention on the internet. In contrast, Facebook and Twitter are online legends who’ve been there and done that for last several years.

Secondly, businesses tried to make the most of dot com boom without proper planning and no Plan-B in place. The boom soon turned sore as the bubble burst and the rest as they say is history. On the other hand, social media is a well thought out business proposition. A number of businesses already have a social media plan/ strategy in place before they jump on to the Twitter/ Facebook bandwagon so they are prepared for the worst while they hope for the best results.

What about Myspace?

To be honest, I’ve never been a Myspace fan. Though it ruled the roost in social media world for a long time, it was never a fascinating value proposition for business users. I strongly believe that any social network needs to mass adoption in the business world in order to sustain and grow like Facebook and Twitter. Myspace failed miserably on that front.

However, Myspace is more of an exception rather than a norm in the social media world. Social media is all about innovation and adding value, Myspace stopped doing both of them and I’m not surprised that it would soon be a thing of the past.

Numbers matter

To reach, the 50 million users mark,

  • Radio took 38 years
  • TV took 13 years
  • Internet took 4 years
  • Facebook took less than 6 months

Surely, it’s no longer a fluke.

As a proud and loyal social media loyalist, I can confidently say that 2011 will be another golden year for social media. Facebook and Twitter will continue to defy their critics and grow at a scorching pace. I also expect 2011 to be the defining year for social media in the business world.

As for the talks of the so-called social media bubble bursting, I strongly believe that it’s nothing beyond false propaganda. What is your opinion on social media’s future in the business world? Please share your opinion by leaving a comment below this post.

Douglas Idugboe, Digital and New Media Marketing Strategist. Founder and Chief Editor of Smedio! A Canadian Bestselling Author, Marketing Strategist, Speaker and Trainer, Who Loves Technology
  • http://twitter.com/pathfindernig Yinka Olaito

    I agreed that there is a whole lot of difference between dot.com bubble and social media. As a concerned stakeholder , i want to believe, social media is here for real and it is going to become part of us for so long. People should get used t o it. Thanks

    • http://busylearners.com Robert Bacal

      you said: “As a concerned stakeholder , i want to believe, social media ” and that IS exactly the point. You WANT TO BELIEVE as to hundreds of thousands like you pushing social media, much like religious evangelists push their religions. It’s about WHAT YOU WANT TO BELIEVE.

      That “hype and hope” syndrome drove the bubble last time, and it’s doing so this time big time. Belief is simply not a sustainable business position. However it takes a long time for advertisers to realize they lose money on Twitter, Facebook, LinkedIn Ads. Years in fact, which is why I see the relative collapse in 2012, after the IPO’s of 2011. It will be ugly, and it will be painful, and for people who work for some of these companies or created their own businesses that depend on these companies, the pain is going to be worse than 2000, simply because the general USA economy will not recover by then. I pray that does not happen, and I pray people will protect themselves and their families financially.

      • http://www.maxadv.com Tom Matte

        Robert,
        I am puzzled by the following statement
        “However it takes a long time for advertisers to realize they lose money on Twitter, Facebook, LinkedIn Ads”.
        If a local Pizza chain buys a few Facebook ads and they increases traffic by 30% …how is that losing money? If I tweet about a blog post gets read by a potential B2B customer and said customer follows up with a call and that turns into a meeting and results in a $15,000 transaction…how is that losing money? I agree with some of your points, but the fact is that many people are having fantastic success with social media. The only reason it would collapse is if everyone stopped using them-not gonna happen. To be honest I want some businesses to stay out of social media. It gives a small company like mine a greater voice. Less competition! I am sure the hype will wane in the next few years, and the landscape will look different, but social media is here to stay. I would suggest you try it as a business development tool. You will be pleasantly surprised.

      • http://busylearners.com Robert Bacal

        Tom, you are confusing business results with activity here. For example “customer traffic” can be overhead and costly. You cannot evaluate success that way. ROI is about MONEY. Pure and simple. Everything else is tangential. With new processes it takes time for people to get beyond the hype and hope and actually determine whether the process actually adds value to the bottom line. We aren’t there yet. It’s faith run, now, not data proven.

      • http://www.yinkaolaito.com Yinka Olaito

        I have no argument against your postulation, 2012 is around the corner, i pray we all live to see it. Beyond that we will be able to align with te truth of social media effectiveness and sustainablity

  • Dimitry Parisi

    I absolutely agree with you that 2011 will be the defining year for social media in the business world. Imho the real difficulty will be to find the balance between monetizing your plattform and opening it for businesses and marketeers without scaring away the users which make these plattorms so ideal for a new and creative kind of online marketing. or in other words: I think that if we want to see a sustainable growth over the years we better stop shouting to the customers in desperate attempts to catch their attention and start listening/observing more to what they want and what they like to use on these platforms – thus allowing us to not only provide great and relatable advertising but also a unique experience for the customer to which he’ll gladly return in the future (…which in turn could prevent anything from bursting ;-) .

  • http://twitter.com/Faryna Stan Faryna

    Lower relative cost is a key driving factor for social media strategy- especially in this economic inferno into which we all descend. Cement shoes – notwithstanding. That’s the business angle. And the reason why more organizations will embrace social media with greater enthusiasm than 2010.

    On the other side of the coin is you, me, Dick, Jane and, collectively, us. Social technology empowers us to do good and encourage others to do better. Together, we can reach for amazing results. And who’s going to give that up without an epic fight?

  • http://twitter.com/HelloBenTeoh Ben Teoh

    Great comments, and I agree: the dotcom downfall is a very different situation to social media. There may be a point where many of the smaller players fail, but the major platforms are robust, and continue to attract new users.

    MySpace doesn’t get enough credit. I think they really opened the door to main stream social media, but the generations using it were just too young to make it viable for businesses. Facebook came along and it was a lot more mature in its approach. Same goes with Twitter.

    Social media will continue to evolve, but it’s not going to burst.

    • http://busylearners.com Robert Bacal

      How is it different, specifically? The psychology is the same. It’s the same hype and hope. It’s the same coming grab for IPO’s. The numbers are trumped up. The economics are identical. From a business perspective it’s a carbon copy. VC investment is nuts in both cases, although this time much of it is offshore rather than American money.

      That said, it’s not going away, but jobs will, and specific companies will, again as in 2000. Google (and Yahoo, sort of) were the survivors, and in this case it will be Facebook, and probably one or two others in specfici niches. that have staying power.

      • http://twitter.com/HelloBenTeoh Ben Teoh

        Hi Robert,

        Thanks for the reply. I think the major difference is that the dot com bubble was shaped around a technology that was still immature, and lacked a wide demographic of users. In comparison, social media is now so ingrained in our culture. It’s everywhere – and people are using it.

        From a business perspective, it seems that instead of creating a website to attract people (as dot com was), businesses are now going to where the people are – marketing is changing.

  • http://xaxii.com XaxiiFan

    Not sure I see the connection between title and the content of this post. Attention grabbing for sure but that’s about it.

  • http://blog.esimplestudios.com Gabriele Maidecchi

    Economic crisis apart, I think there are different conditions around to cause an epidemic bubble like the dotcom one. Of course, specific situations may arise (like MySpace that you mention), but they will have no real impact on the wealth of other companies. The previous dotcom was a serier of chain reactions caused mainly by real estate bursting as well along with bankruptcy from e-businesses renting space, and everything revolved around that. While of course I am not here to say there won’t be a “next bubble” at all, I doubt it will be a dotcom one once again.

  • TheOne17

    I believe it depends on the platforms and how they plan to expand. How they plan to really incorporate and allow brands to utilize them as communication tools. Right now they’re just hubs and could do so much more for brands and their fans!

  • http://www.whyyoushouldtravel.com A Byrd

    A dot.com is place for the perspective business information and a social media site is place for recommendation which is far more powerful than the information you read on ones dot.com. The power of influence has grown astronomically and has been brought by major corporations who had no choice but to catch the fast train ahead for advertising and marketing purposes. It’s only going to get bigger and faster but I do not see any bubbles bursting anytime soon.

  • http://www.beautybusinessblueprint.com/ Robert Samuel

    Very insightful article Douglas. I don’t think the social media “bubble” will ever burst. If any thing it’ll just level off. Social media is as much a tool in society and business as a telephone or television. The only way the “bubble” could burst is if computer usage went down.

  • http://twitter.com/socialmediamofa Sebastian Komander

    I’ll have to agree with you on the not-bursting bubble. The problem with myspace, at least the problem I had, (also being a social media loyalist) was that you where never really sure, what it was for. Meeting friends? Facebook is better for that. Listening to music? itunes, shoutcast, lastFm – enough said. Showing how skillfully you can change your profile with some funny code? Come on, we’re not all html-, css- and whatever-people.

    Myspace was cool for some time, but then they missed the day, when people stopped finding flashy, colorful, individual profiles cool and turned to plattforms that gave them features, apps and so on…

  • http://twitter.com/socialmediamofa Sebastian Komander

    Sorry, double post…

  • http://twitter.com/AudacityInc Audacity Branding

    I think your comparison is spot on. Just because social media and the dot com bust both happen to revolve around the internet, there is this persisting misguided belief that the former will go the way of the latter. The problem with that theory, as you so correctly stated, is that we aren’t comparing apples to apples here. In the dot com boom, nothing really justified those companies’ high valuations.

    With social media, they have played this in a much smarter way. No one within these companies – so far – really appears to be chomping at the bit to see an IPO happen right away (except for maybe the greedier people of the world who are itching to invest in businesses like Facebook, Twitter, etc). If anything, they have been really avoidant of the whole discussion and hesitant to go public without some proof behind the numbers. Mind you, this is exactly what they should be doing if they don’t want history to repeat itself. It’s just the overabundance of news coverage (both legitimate sources and not so) and speculation (because that’s what news sources thrive on for readership) that make it seem like IPOs are looming for these companies when its probably one of the last things on their minds after handling day to day business.

    http://www.audacitygroup.com/?cat=1

  • http://twitter.com/PriorityPR Adam Chamberlain

    I think what we will see is smaller businesses performing social media on their own, in house. What we will see is so-called ‘social media gurus’ loosing their paychecks. The buzz has certainly gone from social media into a more open debate and rational thinking/strategy. Once the kooks are out of the loop I think we will begin to see some exceptional case studies on how to use and connect.

    http://www.prioritypr.net

  • http://twitter.com/EETSR Edward E Tenison Sr

    You are definitely on to something with this post. It is stirring up a lot of unfounded and in many cases misguided fears. First of all what are we really looking at. When the term dot.com is mentioned, what does it actually apply to. The internet as a whole has been a rapidly expanding medium. Just like a “bug light” on a warm summer night, it attracted ungodly numbers of gold-diggers, dreamers, con-artists, unsuspecting dreamers and a host of others. The real culprit in all of this was the IPO process. This process allowed firms seeking investment to to project profitability and stir up speculation regarding future stock evaluation. Since the environment at the time fostered unbridled optimism, valuations tended to range far ahead of real ability to perform. As soon as the “Emperor’s Clothing” was seen to be a ruse, the panic button was pressed and the free-fall began.

    Social media is a totally different ball of wax. First of all, the term is somewhat misleading. What has really occurred has been the advancement in web technology to the point where it is powerful enough to become the defacto platform for social interaction. So a better term (Social Technology) describes what is occurring in terms of the increasing power, flexibility and real time speed being provided through the web today in comparison to the slow speeds, narrow bandwidth, and lack of socially oriented internet based companies that existed only a few years ago.

    There is a growing awareness of the “Tsunami-like” impact of amplified social chatter that can overwhelm businesses large and small despite immense SEO budgets, etc. Everyone knows some of the more prominent examples: Domino’s Pizza (almost destroyed by a YouTube video), Southwest Airlines (almost knocked out due to an angry blogger) and so many others! The adoption of “Social Technology” tools by business is due to very pragmatic and undeniable reasoning. There was a time when one person or group of persons could only muster a limited audience. THIS IS NO LONGER TRUE!

    To say that the use of technology for social interaction will cease to be a force in 2011 or any time in the foreseeable future is really a sign of gross misunderstanding of the dynamics impacting the business landscape today. There are those in various “Ivory Towers” who have begun to see their base of profits being eroded by the “Tsunami” who are putting out misleading messages with the hopes of staving off the inevitable. Push marketing is not dead, but the status quo will never be the same. Businesses that do not make use of “Social Technologies” to listen and directly interact in real time with their their markets are doomed!

    • Rmw26

      Here’s one more reason social media won’t burst: comments that are more thought out than the article. Way to analyze Ed T

    • http://busylearners.com Robert Bacal

      Edward, actually, if you have a good feel about what companies went belly up, and there were thousands during the last collapse (dot.com), almost none of them were publicly traded. I agree that the HOPE was to build a company, then take it public, but most companies never made it. The real culprit was what I call the “hype and hope syndrome”, where a lot of hope and a desire to see something succeed that bordered n the fanatical, blinded people to the economic realities, both present and future.

      On your note about companies “almost” being knocked out, this is primarily urban legend, which is why, in fact the “almost” is there. It doesn’t happen, and almost doesn’t count. I have not been able to find a single case of a company going under as a result of social media where the causal link can be demonstrated. Not ONE.

      There are a tremendous number of myths about social media, and this “power” to bring companies done is hype and hope, not reality. But another is that social media is a fad, or will somehow disappear, and that’s not true either, anymore than the “internet thing” was a fad.

      However, the landscape will be quite different, and most of the players will be gone, or at least in different forms. And there will be tens of thousands of people hurt badly in the process particularly in smaller support companies related to SM.

      Mark it. 2012. The first year VC says no to putting more money in to sustain unsustainable companies.

  • http://twitter.com/EETSR Edward E Tenison Sr

    Great post thru a link on twitter by @Douglasi. HUGE implications in this.

  • http://twitter.com/LeslieKnowlton Leslie Knowlton

    Don’t you have to have money invested to create a bubble? What happens when the SM “bubble” bursts? I loose all my contact information? I certainly do not loose the relationships I have invested in…I just will go somewhere else to continue with those relationships. Print out your contact list on occasion. Keep an archive of resources locally? geeze…what am I worried about loosing?
    I guess the owners and developers can have a bust and loose a job, but they go onto the next job like the rest of us.
    What am I missing here?
    I get value from SM day to day. If it were gone tomorrow those conversations will not be lost.

    • http://busylearners.com Robert Bacal

      Leslie, one of the things you might find, sadly, is that these “relationships” are bound to a particular cyber place. It’s like friends from work. Often, when you leave, all of a sudden all those great buddies from work are no longer such great friends. Happens all the time. Of course, you can still contact them, but it isn’t the same. Remove being in the same place, physically or online, and we know from social psych. that the relationships end up different, and often disappear.

    • Edward E Tenison Sr

      Great comment! This exposes an undeniable truth. Social Media is the use of “Any Media” to interact socially. The phenomena that is cUasing all of the uproar is the increasing adoption of ever increasingly powerful socially adaptable technologies.

      Remember! Direct communication among peers and others driven by our needs as humans to interact for knowledge, confirmation, exposure of mistrusted resources, etc. pre-dates all modern technologies. It advances through “Smoke Signals, Guttenberg, Marconi and now The Internet.”

      The was one individual in this string that stated that he did not know of any firms that were impacted by negative social buzz. I beg to differ as a direct victim of this within a firm that I worked for. The firm I worked for did not take the negative buzz seriously. They acknowledged it, yet stated that the employees should not respond to it and just continue to maintain a high level of quality work, that that would overcome the impact. They were wrong. By the time they acknowledged what became very apparent, tremendous damage was done!

      If you own a business, do not let anyone fool you. The failure to establish sophisticated listening posts to analyze the “noise” so that you can more accurately assess any impact on your markets and/or company is a tactical mistake! What you do not know can hurt you, whether you now realize this or not.

      You must realize that realtime interaction with your marketplace via powerful “Social Technologies” is no longer an option! When those of us who are serious students of the amplification to social interaction that has transpired due to the increased adoption of technologies enhancing social interaction, we see ever increasing ability for individuals to move ever increasing numbers of others to change opinions and consequent activities. Witness what is happening in the Middle East right now!

      The very forum that we are participating in indicates the intense impact this subject is generating

    • http://busylearners.com Robert Bacal

      Just adding. Leslie, it’s not all about you DIRECTLY. Burst bubbles hurt real people in a multitude of ways even if they don’t have money “invested”. That’s part of what you are missing, and perhaps you weren’t involved in the last one.

      Lost jobs, bankruptcies, major sites closing down taking people’s data with them, bounced checks,  user fees and paywall, and on and on.

      So, hows that US mortgage thing working out for ya down there, since that wouldn’t affect people who didn’t have mortgages, right?

  • http://www.maxadv.com Tom Matte

    I am not even sure what the payoff is for the haters of social media. Do they think because they predict it’s demise it will fail? How foolish. It will be another banner year for social media. I agree with another commenter that the “gurus” might start to implode, but that is to be expected. I am hoping LinkedIn finds a way to get more involvement from it’s connections. Yesterdays Maps offering was a step in the right direction.

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  • Frank Diana

    I couldn’t agree more on all points!

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  • http://busylearners.com Robert Bacal

    Seems like you don’t have quite a solid understanding of the 2000 bubble bustup. I’ve written on this a lot, but in a nutshell, but current and 2000 bubble were based on impossible expectations and hype about the money to be earned via advertising and sales. When companies couldn’t sustain due to lack of revenue, it all went poof. Adrates went from ridiculously high (wg. $18cpm) to pennies, and that reflected proper revenue projections. Models were built on the premise of long term revenue staying at high levels, particularly through ad sales.;

    I believe Facebook will, like Google, end up as one of the few last “men” standing after the coming collapse, not in 2011 but in 2012. Twitter will be acquired, and/or drastically modified because it’s simply not sustainable in any respect, features or value of advertising.

    • http://smedio.com Douglas Idugboe

      Thanks Robert for the remarkable responses and follow up to some of the comments below. Like you rightly pointed out, the expectations for the dot comers were steep and these expectations were encouraged by pundits of what the future holds as a result of what could be possible because of the web. As evident in recent web developments, those expectations were feasible but were too early for prevalent infrastructure.

      Due to the fear of the fall, or rather the burst of those expectations, a lot of people are still suffering from what I call the ‘after the depression syndrome’. Just like after the great depression, when folks lost hope in the capital market, people today are exhibiting similar character whenever there’s any sense of excessive confidence in web 2.0 technologies. Like I said in the article, it’s unfair to compare the dot com era with the web 2.0 era.

      Will the burble burst? as I indicated in the article, I don’t believe it would but it leads me to agree with you that there would be “few last “men” standing. The ones that will go burst will be the ones that sit on their laurels and fail to innovate.

  • Chris

    Here is why I disagree……

    Just as quickly as social media caught fire with the masses it can be extingushed……look to sociology and anthropology to understand people……

    Read Mashall McLune – the man behind “the medium is the message” – when technology is exploited enough, people wish to regress back to what they knew (in this case PRIVACY) – however in any situation they can never go back to it – thus something new is created……in this case it was PRIVACY protection sites etc……

    People laughed at me because I decided to use social media as a looking glass rather than a participant……funny, the jokes on them, because now they will be PAYING to have my level of anonymity out there……

    Lemmings.

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