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Home » Industry Case Studies & Presentations, News, Social Media News

What the past tells us about the future of Facebook, Groupon and Twitter

Submitted by on January 13, 2011 – 4:26 pm5 Comments

The news that both Facebook and LinkedIn are preparing to take their shares public has created a froth of both investor and media excitement. Facebook’s projected $50 billion valuation would be more than Starbucks and Dell. Combined! And the head-scratching headlines don’t end there. Groupon easily raised $950 million earlier this week on the back of a business model – group-buying – that cost Paul Allen millions in the late ’90s. Remember Mercata, anyone?

With these billion-dollar-plus dot-com valuations once again the talk of the town it didn’t take long for our internal alarm bells to start ringing. So we decided to take a trip back through time to see if history can teach us anything about the current social media investment frenzy. What we found through the maturation of many social media technologies and sectors  was a four-part process. First step is the promise of first mover status. Next comes the media embrace of the rival – oftentimes, a bigger, better funded challenger – that can often feel like strangulation. Given enough time, what emerges is a true innovator that helps cement real market dominance and grows the sector. But, as with so many tech stories, there always is a future shock waiting just around the corner.

Blogger, LiveJournal, MySpace, Mercata, Picasa, Friendster and even Walmart are part of the historical narrative we ended up sketching.

You can see the whole story on the presentation.

Social media hits and misses

View more presentations from Social Media Influence.
The story is far from over. Let us know what other social media sectors we should document.
This column first appeared in Ad Age’s “Digital Next” section. Bernhard Warner and I will be writing fortnightly columns for them. Here’s the first one.
UPDATE: This post seems to have gotten under the skin of our former Industry Standard colleague John Battelle who writes, no, in fact we haven’t seen this movie before, arguing that there are some perfectly justifiable multi-billion-dollar valuations pegged to the likes of Groupon, Facebook, Zynga and others based on their current revenue stream. As Matthew tweeted to John in response, our exercise to look back at some of the failed iconic sector entrants and – gasp – question if this is likely to happen again shows pretty plainly that there has been quite a bit of maturation in these business models since the go-go days of the late ’90s. Still, we are right to question $50 billion valuations that Goldman Sachs and its top 499 friends put on Facebook and $15 billion for the me-too business that is Groupon. Just saying. – Bernhard


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