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.

tech_bubble

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.

tech-bubble

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”.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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4 Comments on “When the tech bubble bursts it’s going to be loud”

  1. Rich,

    A very insightful piece, I couldn’t agree more.

    Their acquisition bought them a capability that they didn’t have before, but the acquisition is typical of people who aren’t spending their own money and who are seriously smoking their own drugs.

    Social media companies are not worth anymore than the scrap value of the servers and racking that they sit in.

    Everyone forgets that the consumer will move to the next shiny and free platform that comes along as soon as you try to charge for using it…without the consumers fickle participation, these companies are worthless.

  2. Bubbles never burst when everyone is talking about them, when they are on the cover of financial magazines. This is different then the .com era. Facebook and LinkedIn are making money. Twitter, not yet. Facebook will see $100 before $20. Bubble bursts in 5-7 years.

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