When the tech bubble bursts it’s going to be loud

techbubble$19 billion for an app that has 450 million users?  That’s what Facebook paid for WhatsApp and a lot of people are finally scratching their heads and asking “what in the hell is going on here?”

Rob Frankel, the Branding Expert on Twitter said “In effect, FB’s overpaying for other properties justifies its own over-valuation. For now.”  I could not agree more but there is a lot more going on here.

This week Facebook challenged marketers to come up with more creative ads to increase their engagement on Facebook.  While I agree that the creative for most online ads stinks marketers have reached a hard brick wall on the value of engagement as it pertains to hard metrics like sales.

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Another social media property, Twitter, is also having problems as use levels off.  I use Twitter to keep on top of business trends and each morning I find myself blocking “sponsored tweets” which I equate to SPAM. Marketers are trying Twitter but I believe they will pull back as they ask themselves “are consumers ready for interrupted tweets?”.

The 19 percent drop in Twitter’s share price earlier this month and 3D-printer maker 3D Systems’ 33 percent decline since its Jan. 3 peak raise the age-old question of how much companies with high growth potential are really worth. Or, rather, how expectations should be valued — and devalued.

Economist Cover - New Tech Bubble

According to CNBC contributor Gina Sanchez “A lot of people have been talking about a tech bubble and I do think that this [the WhatsApp acquisition] is yet another data point that tells us that this is a bubble. But, that doesn’t mean that the bubble is going to burst immediately.”

Instead, Sanchez sees investors jumping into tech names hoping to hitch their portfolio to a rising star. That could actually inflate any possible bubble, believes Sanchez.

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In the end what will determine if there is a tech bubble is will consumers use it and can the platform make money in a way that doesn’t limit consumer use.  Marketers and brands are going to get more critical of online marketing as more flows into the channel.  Soft metrics like engagement is going to be challenged by marketers and media companies who are going to say “show me the money”.