The dialog is likely to continue and heat up as companies such as Linkedin go public with the share price and P/E ratios defying historical market logic. Others like Facebook and Zynga will follow form and subsequent share prices and P/E ratios will set new records.
How Big Will This Bubble Get?
The Wall Street Journal reports: The CEO of AlleyCorp, Mr. Kevin Ryan oversees a network of startups in New York City’s Silicon Alley. The jewel in his crown, at least for the moment, is Gilt Groupe. Currently valued at $1 billion, the four-year-old business is by some estimates the most valuable U.S. e-commerce company other than Amazon.
As a group, are today’s Internet companies going to eventually be worth 10% of their current valuation? “There’s no way,” he answers. “There’s no way that LinkedIn at $7 billion today is worth $700 million. They own a position. Our recruiters don’t have any product they think is as good as LinkedIn.” Fair point, but is it really worth that much? “That feels like a big number to me. But three, four, billion, five billion? Definitely. And it may grow into that. So we’re just debating plus or minus 40%. That’s not a bubbl
If all things social are a bubble then why are all the Fortune 500 companies chasing all things social? Whether creating their own social products or incorporating all things social into the very fiber of their interactions, internal and external, all these efforts represent billions of dollars in resources and productivity chasing all things social.
A Different Kind Of Bubble
The bubble of the early 2000’s represented early internet companies chasing the IPO Holy Grail. The early promise of internet technologies was over hyped will little capacity to truly change market dynamics until now. Social technology changed the game by accelerating interaction between buyers and suppliers. Buyers, representing billions of individuals, are now growing in strength and volume.
Today the “bubble” represents a race to engage markets, consumers and institutions globally. The race is heating up with new technology being introduced each week. The market opportunity represents both opportunities for all organizations and individuals as well as threats. The opportunities are created by leveraging technology as a competitive tool and using it to bring innovation to market. The threats are elements of timing, position, value added and innovation. To ignore the threats means your bubble will burst from the competitive pressures brought on by the markets of conversations.
These Kinds of Bubbles are Bursting Everywhere
As more and more people engage with all things social the battle for their attention increases amongst suppliers. This month Google launched Google+ and gained 18 million users in three short weeks. G+ represents Google’s first systemic play in the social space and we can expect an aggressive deployment of new functions and features embedded into G+.
And more and more suppliers will be battling for our attention elsewhere. Techcrunch reports: This morning American Express is launching a new deals platform in partnership with Facebook that should make big waves in the payments and offers space.
With the new platform, merchants will be able to target deals at American Express cardholders on the Facebook platform. Initial launch partners include H&M, Sports Authority, Dunkin’ Donuts, Sheraton, Westin, Travelocity and Celebrity Cruises. Although the launch focus is on big national brands, the platform is self-serve and well suited to the needs of small business. This presents a big and credible threat to Groupon, LivingSocial, Google Offers and other daily deal providers.
The real bubble is one where some of the suppliers and their offerings will fail because the represented value is nothing more than a short term burst of attention. The social bubble looks a lot like a real bubble filled with air rather than sustaining value.