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The Coming Social Media Bust?
Posted on May 23rd 2009
Something has been sitting in the back of my mind lately. It largely concerns when the social media party will come to an end. I sincerely believe things will be radically different in three years. From a strictly business perspective none of the major social media players (excluding MySpace) are making money: Facebook, Twitter etc. They're only accumulating more cost in the form of user registarations. Their income stream is close to non existent considering the hype surrounding their recent performance.
Don't get me wrong, these are cool tools. I use them every day for business connections, personal learning and professional growth. However we all lived through the dot-com bust - and know that companies that don't make money don't survive. Simple as that. If I may take you back to 1999, webvan was supposed to make going to the grocery store a thing of caveman past!
I ask these fundamental questions because I am starting to think 2010 will be a make or break year for these companies. Just thinking out loud here but quite frankly I'm not the only one thinking along these lines. Here is something Doug deGrood wrote on AdAge recently:
I'm no economist, but my understanding is, in order for a medium to have commercial value, it needs to be, well, commercial. Hey, this is America, baby, that's how the game is played.
Who knows, maybe some really smart person will figure out how to open the revenue floodgates for Facebook, et al. Currently, the only thing they're generating is more users, which requires more bandwidth, which requires more capital, which, at some point (soon?) will require a boatload of ad revenue to satisfy the VC folks who ponied up the money for this worldwide digital kegger in the first place.
I am not trying to suggest that social media itself will go away. I an confident that the social web is here to stay. What I am wondering about though is the viability of the current business model of the companies providing social media services. In the end the failure of their business model will fundamentally alter the social media landscape. New companies will certainly appear but the environment will be completely different.
Only time will tell I guess. Until then follow me on Twitter!
Image source: stuant63 (Flickr) shared under creative commons.
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