stories on the rise and rise of Social Media. Indeed the new film about founding Facebook is the number one film in the USA. Taking a contrarian view, the more discussion there is of these wondrous new businesses, the more likely it is we are seeing a bubble effect.
At Twitter too the news is that the co-Founder is out, replaced by a former Google executive as they try to find a way to make money out of Twitter.
For a long time I have been sceptical about actually making huge amounts of money out of social networking, no doubt it will be cracked, but will the fad last long enough to sustain the business? Already Facebook is slowing in its acquisition of members and tweeting is losing its cool. The Internet has seen many risers and fallers over the past decade, some huge companies like AOL have gone by the wayside and even Bebo has faded away, once a Social networking star.
So for investors this is a doubly difficult business as picking winner is hard and these businesses often don't list until the hype is ripe. You could not buy google for 20c a share like you could say Cairn Energy. Instead the IPO's are at high valuations with much more downside risk than upside. In the UK we have the Ocado debacle this year too, a hybrid online/retail play with a silly price designed to net the owners a fortune. On the other hand, will many of these companies ever IPO?
What this demonstrates is the reality of the decline of the Capital Markets; small and fast growing tech companies can stay private, take PE and VE money and never share their growing wealth with small investors (noting of course the huge risks mentioned above). I guess the Dotcom boom still has a lot to answer for and now there is not even a route to trying to pick the winners.
Anyone have any good social media companies on their watchlists, is it possible still to buy into this bubble and get out before it bursts?