Leading dot-com companies from 2000 have almost the same market cap as today’s leading social media companies…should there be worry?
A potential social media bubble has recently become a hot topic.
In a March 27th article from The New York Times, a correlation was shown between the dot-com bubble in the late 90s and today’s social media boom.
According to the article, five social media companies have a total valuation of $71.3 billion. These companies include Facebook, Twitter, LinkedIn, Groupon and Zynga. While none of these companies have gone public yet, this total valuation is similar to that of the top 24 dot-com companies in 1999, which totaled $70.96 billion in market capitalization.
Is social media another great bubble waiting to burst? Not yet, or at least not until everyone agrees that a social media bubble is present; are we headed in that direction?
As many similarities are drawn between today’s social media companies and the dot-come collapse, including many of the same analysts and venture capital firms, George Santayana, the Spanish American philosopher and writer, may have said it best when he stated, “those who cannot remember the past are condemned to repeat it.”
The focus of relationships
Putting the investing strategy of Facebook and Twitter aside, it’s important to ask yourself what the relative value of Amazon is to Facebook or eBay to Twitter.
When it comes down to structure, at the end of the day, Amazon is a digital bookstore and eBay is a digital flea market. Facebook and Twitter are more like virtual “water coolers” to discuss the day’s events and make plans for after work.
Social interaction is not new, nor are bookstores and flea markets. These websites are digital ways of enabling old behaviors online.
Download a FREE copy of Best Email Subject Lines for Selling Premium Subscriptions and Memberships and discover an extensive list of email subject line frameworks that are consistently proven to sell and boost revenue for publishers.
Truth behind economic value
There is inherent value for companies like Amazon and eBay. Amazon is a massive online bookstore that morphs a place to buy print books into a larger, digital environment that can hold a much larger supply. eBay has morphed the concept of a flea market into a digital haven for any product you’re looking for.
There is the opportunity for direct revenue generation at these locations.
On the other hand, social media is the equivalent of a biplane that flies over a beach, displaying a banner for a restaurant. It holds a message that resonates the best about what to do when the sun goes down…but it doesn’t give insight on what car to buy, what seminar to attend or what knitting needles to purchase.
Social media is much harder to monetize and insert yourself in to.
For instance, although people are spending more time on Facebook than they do on Google, Facebook has been valued at $1 billion, while Google is worth 30x that.
The activities behind search and email have a commercial framework designed for monetization. SEO has replaced the YellowPages as searchers are typically looking for an answer to a problem, which they are often willing to pay for. People subscribe to email newsletters because they are pursuing something they are passionate about and committed to.
The real point of social media
Social media is the new public relations…it’s about getting the message in front of people and working on branding initiatives.
If you go to a baseball game, you will see advertisements on the outfield wall. You surely aren’t going to the ballpark for the ads, but you will see them regardless. Facebook operates in the same manner.
No matter how segmented your social media marketing efforts are, the larger problem is with contextual intent. You cannot blatantly market your products through social media without contention from users.
For all publishers out there, don’t for a moment think that social media will replace SEO or email marketing. Social media is nice to have and helps share your content, but it doesn’t generate revenue like the other online marketing solutions like SEO and email.
If you look at the time and money being spent within your organization, 40% should be dedicated to SEO, link building and related activities. This will help high-quality people who are looking for your content get directly to your site.
Another 40% should go towards email, with 10% for social media marketing and another 10% for everything else.
Never forget the importance of delegating time to the marketing efforts that make your organization money.