Are We in a Social Media Bubble?

Social media is everywhere, so are we in a social media bubble? It would appear so, given the amount of technology devoted to utilizing social media and making profits off it. Unfortunately, bubbles tend to burst and trends often die out. Will this trend continue or will it, like many other bubbles, pop?

A bubble is broadly caused by intense economic activity and speculation involving a commodity that is unsustainable. Tulip prices in Holland in around 1636–7, for example, inflated massively until single bulbs were selling for more than a skilled craftsman could make in a decade. Prices couldn't carry on inflating, and in February 1637, they collapsed abruptly. The intrinsic value of a bulb was only a fraction of a guilder (Dutch currency at the time), and the speculation had carried the projected value into the hundreds and possibly thousands of guilders.

So what has this got to do with a social media bubble? Like the various bubbles before it, social media has been subject to fevered interest. However, unlike the bubbles before it, this interest has been moderated by a bubble that happened in the early 2000s: the dotcom bubble. Unlike many previous bubbles, the investors who would've poured money into social media have learned from the boom in dotcom shares. Many people lost money when various dotcom schemes collapsed, and trade has been a little more cautious than it might have been.

Added to that is the global recession; many small investors had to tighten their belts before investing speculatively. This meant that the public never really were able to invest in the various social media sites, so the sites enjoyed rapid but reasonably stable growth that allowed communication professionals to slowly utilize and discover what these sites could do for them.

Finally, many social media companies are privately held companies, or at least, they remained privately held for a long time. Facebook only had an IPO in 2012, eight years after its founding. By that time, it was big enough that its stock price was broadly sustainable, although it did go down quite sharply at first.

However, Facebook has a limited shelf life as teenagers rarely want to join the same social network that their parents are on, and with that, it seems that Facebook must shrink and eventually collapse. However, Facebook's business model is sustainable for now, and it appears that some employers still ask for Facebook passwords as part of the recruiting procedure.

So who else can take over from Facebook? Snapchat is one such possibility, but it's hard to monetize it, and Twitter cannot seem to monetize anything at all. Google+ was a broad failure, and Weibo, the Chinese equivalent of Facebook and Twitter combined, has yet to make serious inroads into the Western social media market.

Pinterest also has no real way of monetizing its users, but it and Twitter are the giants that could cause a bubble to burst. Add to that the amount of money pouring in speculatively into tech startups, and a bubble appears ready to inflate rapidly and explode. However, that hasn't happened yet, so communications professionals can sit tight and use social media with merry abandon.

(Photo courtesy of freedigitalphotos.net)