A lofty online debate hosted by The Economist magazine reached a sobering conclusion for anyone who sees as the next big boost—for meetings or for the economy as a whole.
After weighing the arguments, readers concluded that social media companies like Facebook, LinkedIn, and Groupon are the leading edge of a new technology bubble. With the dot.com bust still a painful memory, it’s worth asking whether there are risks in a collection of social media platforms that are rapidly becoming a cornerstone of our industry.
In the debate, retired “serial entrepreneur” Steve Blank compared the sky-high valuation of social media stocks to the rise and fall of the dot.com and housing markets. With Facebook and LinkedIn valued in the billions, Blank said the bubble is on, with too many investors assuming every stock will be a winner.
“Obviously, some of these companies will have hundreds of millions of customers, unprecedented revenue growth, and great profits,” he wrote. But when some or many of them crash, anyone who depends on them will be collateral damage.
Venture capital king Ben Horowitz, who apparently engineered Skype’s $8.5 billion sale to Microsoft, countered that e-commerce is soaring to new levels. “With costs 100 times lower, programmer productivity 10 times higher, and the market 50 times larger, it stands to reason that many more Internet businesses will work today than the last time around.” And with billions of mobile customers trading up to full-feature smartphones, the Internet is poised to double in size.
Moreover, “software is eating the world,” transforming or obliterating industries like print publishing, music distribution, radio, and direct. With so much new business right around the corner, he argued that the high stock prices attached to social media “have not become completely divorced from any rational thought.”
There are some frontline truths we should keep in mind before we take too much comfort from Horowitz’s remarks:
Mitchell Beer, CMM, is president of The Conference Publishers Inc., Ottawa, one of the world’s leading specialists in capturing and repurposing conference content. Beer blogs at http://theconferencepublishers.com/blog and tweets as @mitchellbeer.