We see an increasing hype in social media these days. Facebook and Twitter are on top of the headlines. There is a lot of interest in upcoming IPO’s for these companies. Other players in the field such as LinkedIn, Groupon and others are in the talks as well. Facebook and its “alliance” with Goldman has certainly increased activity in the social media world. In the most recent news we read that JP Morgan Chase has now also increased its efforts to secure a piece of the cake. In some reports the activity was already questioned and the fear of a “Internet Bubble 2.0” was starting to come out, or was at least mentioned as a possibility.
Well, is it creating a bubble, or not? These financial giants intent is clear: IPOs! And cashing in on them. Those that are old enough (how does that sound?) to remember the bubble 1.0, know how handsomely the IPO Underwriters cashed in, until it was all over. A few weeks back, in this blog, I asked the question, what is the next business model of Goldman and its competition? I would say, here it is. This is how they intent to make a lot of money. It only takes one reason to confirm the theory: They wouldn’t do all the running around, if they wouldn’t smell a handsome payout.
Admitted, there was a lot of hype created by, listen to this, Main Street, before any of the investment banks even thought to take a look at it. So, this one in advance, if it turns out to be a bubble, Main Street created it itself by jumping on it and posting what ever needed to be posted, or not. MySpace was the first “must have” and then followed Facebook. It appeared, and still does, it is the most important thing to let the entire world know what color your new shirt is or what one ate last night. It also appears that this social media hype has created an irresistible need to post more and more in order to increase oneselves value. Not being on Facebook is almost equal with living behind the moon. I don’t know, it all sounds somehow familiar. Also, Facebook, and others, have turned out to be the best source of gathering consumer information. And that opportunity has led some to be a little less careful with protecting their users privacy.
So, what’s to expect in the future? In my opinion, the investment banks will make serious money again. Main Street investors will too, and lose it again when they become to greedy. The load of junk mail will increase, both, online and offline and we will wonder where all that stuff is coming from. We go to interviews and wonder how it comes that the interviewer, amongst others, knows things about us we have long forgotten about and didn’t even mean to be serious about.
What to do? Not much we can do to prevent it from happening. Ride the wave as good as you can. Just be careful not to be too greedy. Make sure you get out before the entire thing is going to bust. Indications for the bust and what to look for? Well, remember the last two bubbles? Internet 1.0 became ridiculous when everyone with a website and without business model got funding. The housing bubble became desperate when even a dog could get a mortgage for his doghouse and even that mortgage was turned into a security. So, things like that is what we need to look at. The big runners that are already out there will make some money. Everything that follows will display an increasing risk. My opinion, stay out of those.