The growth of social networking on the internet has been very reminiscent of the internet bubble of 2001 – companies throwing money at social thinking that that’s the new economy. Linked-In IPO’d at amazing valuation, Groupon is soon to IPO at a what appears to be a high price, and some say Facebook will IPO in the 200 Billion range.
Much like the internet was overhyped in 2001, Social Networking is overhyped and poised for a big fall. Not to say that social networking is a worthless idea – much like the internet in 2001, sound business models just need to be designed around it. Thats why this article caught my eye:
And Groupon traffic seems to be leveling, and you are seeing more red flag articles on Groupon:
A few years ago search engine optimization was all the rage – now you see alot less money thrown at that. I predict similar drop in interest in social networking. Interestingly, unlike the 2001 bubble that burst, the impact on public stocks wont be as big. Most of the social networking companies are funded by venture capital, to the direct impact to the stock market will be smaller.