Hear that sound? According to Jesse Colombo at Seeking Alpha, it’s the sound of the social media bubble finally popping. Since January Colombo, among others, has warned of a 90s-esque series of bubbles he termed the “CCC Aches” which stands for China, Commodities, Canada, Australia, College, Healthcare, Emerging markets and Social media.
Economists have claimed that we’re on a road to recovery as the housing market has crept back up from its scary depths. But Colombo claims that the aforementioned bubbles have been growing in the background, posing a greater threat than the housing market. With Facebook’s IPO failing to meet expectations and other social, mobile, and online stocks like Zynga, Yelp, and Groupon steadily falling, some more sharply than others, it’s about time that Colombo can say ‘I told you so’ – which isn’t a good thing.
As it stands today, Facebook CEO Mark Zuckerberg is looking at a $9 billion loss and Groupon CEO Andrew Mason a 75% loss after their insanely popular companies went public.
What’s to blame and what’s the solution? It’s complicated, but Colombo points to “wildly optimistic Wall Street stock analysts” with monetization being the big problem and solution. Social Media sites like Facebook and Twitter make their money by in large on advertising, however, the large amounts of money that go into advertising on these platforms isn’t proving to be as successful as one might think. In fact, it’s difficult to really tell or clearly compare ads on the social media giants and even more unclear as to whether or not clicks end up being sales.
The most worrisome part of a potential social media bubble burst isn’t the wallets of CEOs or companies looking to use the platforms to make sales, it’s the 500,000 jobs in the United States created as a result of social media. That boom has also had an effect on housing in San Francisco and New York as well as spurred a rapid growth in the number of startup companies closely tied to social media.
Will these CEOs figure out a way to stop the bleeding or is this the beginning of a series of bubbles bursting – a blast from a very unstable economic past. Hopefully it’s the former, even if I have to be enticed to buy 2 pairs of shoes for the price of one, delivered next day air, with a simple click.