I love social media. But I’m worried it's becoming a bubble. Over the last couple of years, it’s been displaying some typical features of bubble-like behaviour.
We’re witnessing endless expansion of the main platforms. A rush of investor cash into ‘the next Facebook’. Irrational IPO valuations. A sense that we must get in or miss out. The rise of exploiters and gamification. Rising quantity but falling quality of content. And an ever rising number of scammers, fakers and fraudsters.
Gary Sharpe posted his take on this phenomenon the other day:
The evils of the social media scene have made the networks places of corruption, vice and crime. The levels of fraud, returns-on-incompetence, digital de-reputation, self-servicing, rip offs, anti-knowledge, time wasting, money-down-the-draining, preying on the weak/naive/desperate, copy-cats, liars, cheats and ill-informers has reached epic proportions.
Gary never minces his words!
I track stock market sentiments about social media platforms and there’s some definite nervousness showing especially around Twitter:
Only one platform, Facebook has managed to deliver the sort of revenue growth that investors expect to see. All the other platforms are struggling to meet this key objective.
Another of my respected online friends, Jesse Colombo, Forbes columnist, analyst, and bubble expert had this to say about LinkedIn way back in 2012:
Another of my respected online friends, Jesse Colombo, Forbes columnist, analyst, and bubble expert had this to say about LinkedIn way back in 2012:
The general public, in my view, still has irrationally high hopes for the commercial success of social media companies and LinkedIn, one of the last vestiges of the social media dream, is expected by many to carry the torch for the sector going forward. These irrationally high hopes can certainly be seen in LinkedIn's astronomical 1,000 P/E ratio (source), which is far too rich even when taking into consideration the company's healthy expected 5-yearearnings growth rate of 64.69%. Richly-valued growth stocks, such as LinkedIn, have a strong tendency of plunging if there is even a slight disappointment in revenue and earnings growth.
Jesse’s cautiousness about Linkedin has proved to be well founded. Just look at the stock value since he wrote this in 2012:
Now I am assuming that you are neither an investor, nor a shareholder in social media.
But you are probably a user.
And if your use of social media has any sort of connection to your business or career this stuff matters.
So this post is about my take on what I see ahead and what we as users should do about it to protect our vested interests.
The outlook
First I see some consolidation ahead as undercapitalised platforms get acquired by others who see potential synergies arising from such acquisitions. The struggling share valuations make such acquisitions more and more likely. The worst case scenario is an event triggering total collapse of investor confidence in the sector. If you think that’s unlikely, think Lehman Brothers.
The implications
Weak revenue and profit growth is the principal reason for growing investor disillusionment with social media firms. This means that we can fully expect to see a steady rise in things we as users mostly don’t like – limited free access, more paid-for elements, more demands for personal data to access content and apps, more intrusive advertising, higher quantities of junk content.
More intrusive data capture
All data has value. And when you're a social media platform owner you have bucketloads of it. Better still you acquire it more or less for free. And you can secure pretty much unlimited rights over what you do with it - provided you describe these rights within a long and legally dense set of user terms and conditions which no-one ever reads, yet still clicks the “I agree” button.
More noise
We are already at saturation point. The sheer volume of content pumped daily into my social media channels is completely beyond my capacity to consume any but a truly tiny fraction of it. All our capacities to consume media are finite. But the supply is rising exponentially. The only possible mathematical outcome is a continual fall in the overall level of media consumption as a share of what’s produced. In other words, if you produce online content, you can only expect your overall consumption levels to fall in future.
What to do about it
So against this backdrop, there seem to me to be several sensible actions to take if any of your career or business interests are connected with social media:
Build real communities that share your beliefs
Having a million Facebook likes, a hundred thousand Twitter followers and 10,000 Linkedin connections, is going to become less and less valuable, unless they are a truly connected audience that has active goodwill towards you.
Earn your goodwill by being kind to your online friends
Goodwill isn’t created by people being so amazed at your profile stats, that they are wowed into following or liking you. Goodwill is created by showing people you care about them.
Focus on quality over quantity
The exponential growth of content and the finite capacity of people to consume it, means that content quality will become increasingly important.
Build trust
We don’t create trust by slick presentation, or shouting about how great we are, or bludgeoning people into submission with sales messages. We create trust by our actions that show we care about the people we are connected with. And by being willing to help them, whilst asking for nothing in return.
Own your own media
Social media platform owners have all recognised that crowdsourced content is a fabulous (free) source of assets for their businesses. By putting our work onto Facebook or Linkedin, we are surrendering our ownership of that media and placing our fate in their hands. And if you have any sort of online content, it’s essential that you own its domain. In other words “Don’t build your house on rented land.”
I’m not saying don’t post on Linkedin or Facebook, I’m just saying that if that’s all you do you cannot realistically expect to see value growth from these activities in future. The only sensible decision is not to have all your eggs in someone else’s basket(s).
Expect change - permanently
It’s easy to forget that social media has already had a string of casualties in its brief period of existence. Remember MySpace? Friends Reunited?
I believe that social media platforms have lifecycles. But because the pace of tech change is now so rapid and mature platforms so slow to change (Facebook is apparently working on introducing a ‘major innovation’ - a dislike button), I think there will be more casualties sooner than we might think.
When we try and predict the future, we are almost certain to be wrong. But I hope these observations are at least helpful in framing your own expectations and actions in the coming months and years.
I would love to hear your reactions to these forecasts!
But you are probably a user.
And if your use of social media has any sort of connection to your business or career this stuff matters.
So this post is about my take on what I see ahead and what we as users should do about it to protect our vested interests.
The outlook
First I see some consolidation ahead as undercapitalised platforms get acquired by others who see potential synergies arising from such acquisitions. The struggling share valuations make such acquisitions more and more likely. The worst case scenario is an event triggering total collapse of investor confidence in the sector. If you think that’s unlikely, think Lehman Brothers.
The implications
Weak revenue and profit growth is the principal reason for growing investor disillusionment with social media firms. This means that we can fully expect to see a steady rise in things we as users mostly don’t like – limited free access, more paid-for elements, more demands for personal data to access content and apps, more intrusive advertising, higher quantities of junk content.
More intrusive data capture
All data has value. And when you're a social media platform owner you have bucketloads of it. Better still you acquire it more or less for free. And you can secure pretty much unlimited rights over what you do with it - provided you describe these rights within a long and legally dense set of user terms and conditions which no-one ever reads, yet still clicks the “I agree” button.
More noise
We are already at saturation point. The sheer volume of content pumped daily into my social media channels is completely beyond my capacity to consume any but a truly tiny fraction of it. All our capacities to consume media are finite. But the supply is rising exponentially. The only possible mathematical outcome is a continual fall in the overall level of media consumption as a share of what’s produced. In other words, if you produce online content, you can only expect your overall consumption levels to fall in future.
What to do about it
So against this backdrop, there seem to me to be several sensible actions to take if any of your career or business interests are connected with social media:
Build real communities that share your beliefs
Having a million Facebook likes, a hundred thousand Twitter followers and 10,000 Linkedin connections, is going to become less and less valuable, unless they are a truly connected audience that has active goodwill towards you.
Earn your goodwill by being kind to your online friends
Goodwill isn’t created by people being so amazed at your profile stats, that they are wowed into following or liking you. Goodwill is created by showing people you care about them.
Focus on quality over quantity
The exponential growth of content and the finite capacity of people to consume it, means that content quality will become increasingly important.
Build trust
We don’t create trust by slick presentation, or shouting about how great we are, or bludgeoning people into submission with sales messages. We create trust by our actions that show we care about the people we are connected with. And by being willing to help them, whilst asking for nothing in return.
Own your own media
Social media platform owners have all recognised that crowdsourced content is a fabulous (free) source of assets for their businesses. By putting our work onto Facebook or Linkedin, we are surrendering our ownership of that media and placing our fate in their hands. And if you have any sort of online content, it’s essential that you own its domain. In other words “Don’t build your house on rented land.”
I’m not saying don’t post on Linkedin or Facebook, I’m just saying that if that’s all you do you cannot realistically expect to see value growth from these activities in future. The only sensible decision is not to have all your eggs in someone else’s basket(s).
Expect change - permanently
It’s easy to forget that social media has already had a string of casualties in its brief period of existence. Remember MySpace? Friends Reunited?
I believe that social media platforms have lifecycles. But because the pace of tech change is now so rapid and mature platforms so slow to change (Facebook is apparently working on introducing a ‘major innovation’ - a dislike button), I think there will be more casualties sooner than we might think.
When we try and predict the future, we are almost certain to be wrong. But I hope these observations are at least helpful in framing your own expectations and actions in the coming months and years.
I would love to hear your reactions to these forecasts!
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