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Social media bubble is leaking

Posting in Energy

Going soft. Investors' enthusiasm for social media is deflating.

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It's not quite time to sing Pop Goes Facebook, but the social media bubble is slowly deflating, Bloomberg Businessweek reports.

For those of you who have just fought your way out of a black hole, social media companies are groups like Facebook that get people to hand over personal data and in exchange give those people web access to each other. Using Facebook, individuals are able to tell the world compelling information - replete with photos - such as "I just ate a hamburger," or, for the real adventurous, "I just smoked a doobie." It allows millions of others to immediately respond with world-changing posts such as "OMG." Facebook gets to profit from the people's formerly private information.

If you think that sounds like a dubious business model, you're not alone. As Businessweek reported:

Social media companies drew only 2 percent of the venture capital headed to Internet-based enterprises last quarter, according to data published on Tuesday by CB Insights, a research firm that tracks venture-capital investment...The peak came in the third quarter of 2011, when social companies led by Twitter took in 21 percent of the total $3.8 billion in Internet deals by venture capital firms.

Venture investors are now going for things like "big data" and "cloud computing." Businessweek noted that they're backing "boring companies that make tech products to sell to business."

One former Facebook engineer perhaps saw this coming two years ago:

“The best minds of my generation are thinking about how to make people click ads,” the engineer, Jeff Hammerbacher, told Bloomberg Businessweek at the time. “That sucks."

Of course, it does seem like the social media genie is out of the bottle, and there's no putting it back in, no matter how astounding its privacy invasion. But it's a good sign that investors are taking a more sober view.

Now, if you don't mind, please "like" this story. Thank you.

Photo from Joost Nelissen via Flickr

More social media business musings and data ditties, on SmartPlanet:

— By on July 21, 2013, 9:25 PM PST

Mark Halper

Contributing Editor

Mark Halper has written for TIME, Fortune, Financial Times, the UK's Independent on Sunday, Forbes, New York Times, Wired, Variety and The Guardian. He is based in Bristol, U.K. Follow him on Twitter. Disclosure