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Social media – is the bubble going to burst?

January 28, 2011 • Opinion

Richard Mullins, Director at Acceleration

Over the past few years, social media has ballooned from a small, emerging market into a major force in the online marketing and advertising space. However, those who lived through the dotcom boom-and-bust cycle can’t help asking whether we are about to see another bubble burst.

After all, the hype about social media has quickly become inflated, more brands are throwing resources into interacting with customers on social media, and there is still no real clarity about how most social networking sites are going to monetise the massive user bases they have built, outside of advertising.

At what point, ask sceptics, will investors become unwilling to pour their money into these websites? When will brands start to become disillusioned with their returns from advertising on social networks and using them as platforms to interact with their customers?

At what point will users start leaving social networks in their droves, either out of boredom or because of concerns about how their confidential data is handled by websites such as Facebook? The fact that an increasing number of people are asking those questions certainly seems to indicate that the social media market will soon go through a period of readjustment.

However, I don’t believe that we’ll see the bubble burst as dramatically as it did in the early 2000s when the dotcom market imploded. Instead, we’ll see businesses and consumers alike gradually integrate social media into their everyday lives until it simply becomes one of the many channels they use for everyday communication. I’d describe that as a market normalising rather than as a bubble bursting.

There are a number of reasons that the bubble will not burst dramatically as it did during the dotcom collapse, starting with the fact that the barriers to entry into social network are relatively low for most brands.

Advertising on Facebook isn’t prohibitively expensive neither is it difficult or costly to set up a profile on Twitter. Most brands could easily cut their losses and disengage if they had to. Rather than fretting about whether social networking is a bubble waiting to burst, companies need to look at ways to put social networks to work for them.

One of the reasons that we might go through, what Gartner would call a trough of disillusionment, in the social networking arena is simply that many brands are not leveraging it as effectively as they could.

Social media is a great channel for starting relationships with customers and a good one for maintaining (sometimes even repairing) relationships. It’s also good for holding conversations with customers and influencers, using software such as CoTweet.

This is important customer relationship management work, yet many businesses have outsourced social networking interactions to a Public Relations agency. Other have tasked a junior staff member with looking after this function, reasoning that someone from Generation Y will get this social networking stuff.

Organisations should instead be treating it more strategically and aligning it more closely with their other marketing and customer service channels.

That doesn’t mean that they should overinvest in social media or overvalue social media relationships, but simply that they should manage it as a part of the business.

After all, Facebook recently passed the milestone of 500 million users worldwide. Social media might not be the only part of the online landscape, or even the most important one, but it certainly looks like it’s here to stay.

By Richard Mullins, director at Acceleration

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One Response to Social media – is the bubble going to burst?

  1. Kamyar says:

    Good post. I think the social networking will eventually lose its attractiveness when the number of players in this field become enough, on the other hand saturated. Social networking is a new concept in consumer internet and now creeping toward business networking ( like jive ) and at some point it will be not-a-new-buzz-anymore although people using it for different reasons. I think the role of innovation here is very important. We have been seeing very interesting concepts in the past few years which made the social networking attractive not only as a technology but as a new way of communicating with the rest of the world. However, in near future this shift of communication ( sending tweets, utilizing mobile phones for every single thing , etc.. ) will become very very normal, become a routine. And that might be a point at which social networking backfires. As we use the social networking to have a better life, there will be a point in our lives that we might not be happy to see our smallest piece of information out there in facebook or twitter or abcd.

    In nutshell, I think there will be a bubble burst for social networking but it needs to be a bigger one to burst and that is the time when a lot of companies and technologies will go down with it.

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