Six Pixels of Separation - The Blog
November 28, 2007 9:43 PM

Online Social Networks Double Bubble

What do you think about the "B" word?

Bubble.

I lived through the dot com bubble. I was there before it happened. I even stuck around for a little bit after. Being on the search engine side, I had a very different perspective - mostly because I was able to see the traffic spikes and understand what people were looking for when times got tough. It was one big, massive tag cloud and zeitgeist that I found fascinating on many levels.

I don't think we're going to go through another bubble now, but it seems like others do.

I read with appetite the Media Biz Blog posting by Paul R. La Monica on CNN Money yesterday entitled, Web Bubble 2.0 For Social Networks?

La Monica has a frank conversation with Jim Nail (Chief Strategy and Marketing officer at Cymfony) about advertising, social media, online social networks, valuations and the Internet's ability to deliver as a Marketing channel.

“'Marketers have finally given up the illusion that TV is the magic solution to everything,' Nail said. 'The problem is marketers want to look for the next magic solution and social media is not it.'

Nail argues that while consumers will probably continue to flock to social media sites, he’s not sure that any of them will really be able to generate large amounts of revenue from advertising. For one, he thinks that there are too many social networking sites out there chasing a finite stream of ad dollars.

'There are too many companies. So from that standpoint, there is a venture capital bubble in this area. There will have to be more consolidation,' he said.

Nail added that trying to handicap who the social networking leader will be several years from now is extremely difficult given how much change has taken place in the business in just the past two years. What’s more, fickle younger Web users have shown a tendency to flee one social network for the next once something cooler comes along."

My argument against another dot com bubble is threefold:

1. There is now critical mass online (anyone who wants to be online, is online). Even people with limited financial resources can go to a local shelter, church, hospital or library and get online. During the first bubble there was tons of hype but not enough people online.

2. Broadband penetration - it's impressively high in Canada (almost the best, per capita, in the world) and in other parts of the world. I know there are still huge issues with connectivity, but it is getting better and is miles ahead of where we were during the first bubble.

3. Stuff works. If you're playing with iGoogle, flickr, Facebook, or buying something on Amazon.com, it's all fairly intuitive, easy and fun to use. Trust me, back in the day, it was a miracle if the idea could even be executed online, let alone the massive amounts of crashes, bugs and errors you would get on any given day.

I don't think there will be another dot com bubble, but online social networks could have their own little bubble on the verge of bursting. Back to Web Bubble 2.0 For Social Networks?:

“'Now it’s the Cokes, P&Gs and GMs of the world. Real brands are fueling online ad spending,' he said. 'In the late 1990s, there was this notion that Internet ad campaigns were more trouble than they were worth. That’s no longer the case.'

But that doesn’t mean that all online ad-supported companies will benefit. Nail sees search advertising, not social media, remaining the online ad of choice for many companies since it is easier to quantify the impact of a search ad on sales."

The next bubble could be caused because of a lack of metrics, analytics and measurement? This is a problem we can solve. Let's get the right people in a room... or set-up a Facebook Group.

By Mitch Joel


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