By Joshua Smith
Evaluating the current trends and impact of younger generations is imperative when predicting the future of web 2.0 that is the social media storm of the late 2000’s and today.
Many current sources, like Newsweek and TheStreet.com are worried about a second dot-com burst like the one seen in 2001-2003. Lauren Bloom of TheStreet.com recently commented, “Investors who sold their dot-com stocks before the bubble burst made fortunes -- those who didn't lost their shirts.”
Fearful investors should consider the following in determining the profitability of dot-com investing in today’s market:
Newsweek recently posted an article about the stability of today’s internet infrastructure compared to that of a less developed internet nearly a decade ago. “The Internet was far less widely used than it is today, with many consumers feeling a little queasy about sharing personal and credit-card information with businesses that lacked brick-and-mortar facilities. Still, visionaries saw the potential for the Internet we have today, so virtual companies sprung up and grew like weeds as investors threw money their way.”
The internet has matured since 2000-03. So have the users. In a recent poll, conducted by social media guru Mashable.com, it was stated that the internet has far surpassed TV as a main sources of news for young adults. This includes newsfeeds from social media sites like Facebook and Twitter. This trend helps investors predict the credibility and sustainability of the internet and social media for younger generations.
PewInternet.org, an internet research organization, released information obtained about internet usage by generation. It relays that, “Teens and Generation Y (internet users age 18-32) are the most likely groups to use the internet for entertainment and for communicating with friends and family. These younger generations are significantly more likely than their older counterparts to seek entertainment through online videos, online games and virtual worlds, and they are also more likely to download music to listen to later. Internet users ages 12-32 are more likely than older users to read other people's blogs and to write their own; they are also considerably more likely than older generations to use social networking.”
The bottom line is investors have matured from the dot-com crash and so have dot-coms.
However, there are other factors to consider when investing in an internet driven company; specifically the regulation and privacy of its users.
A Newsweeks article recently stated, “In December, the Federal Trade Commission issued a proposed framework that, among other things, would permit Facebook users to block advertisers from accessing information about their online interests. If that framework is implemented and widely used by Facebook subscribers, it could seriously impair the site's value as a potential platform for targeted marketing.” Consider the impact of investing if advertisers could no longer reach the consumer base. Sites would need to capture user information like Amazon and Ebay to convey consumer trends; selling the information it captures about its users as raw marketing data.
Corporations like Goldman Sachs have shown a significant interest in social media sites like Facebook. Some say the investment is a ploy to purposely inflate the Facebook value score to make a quick profit. However, the investment by Goldman Sachs has allowed Facebook to postpone issuing an IPO; meaning they do not have to disclose financial earnings or investor complaints.
Jeff Wilson, APR of CRT/tanaka recently stated on the company’s blog, TheBuzzBin, “Just yesterday, it was reported that LinkedIn could make an initial stock offering in the first three months of the year. The size of the offering is not known yet, but it is expected to be small relative to the company’s value. LinkedIn’s implied value on the private trading marketplace SharesPost is $2.2 billion.”
The social media “Big Three,” (Facebook, Twitter and LinkedIn) have shown record growth over the past year. Admittedly those numbers are reaching their statistical peak, rapidly approaching the number of estimated online users.
The slowdown is coming, but a forecasted crash is unlikely.
