Friday, December 26, 2008

The Social Networking Bubble

Bubbles can come in many forms. In the 1600's the dutch pushed the price of tulips to levels that were not justified economically at the time. One could have exchanged several oxen and a wagonload full of a year's worth of food for some moderately desired varieties of the high tulips. Whats more, supply constraints could not explain it.

The common and widely available tulips exploded in value as well. They were traded by the lower classes and even had options written on them for forward delivery. If the 17th century dutch had google back then, I would be willing to bet more than a few guilders that the search term "tulip" would garner a result like the one above in google trends.

I am frightened that we're in a social networking
bubble. Some of the corpses are already floating to the surface. myspace has faltered, something i don't have a compelling explanation for at the moment.

since microsoft's historic investment, much focus has shifted to facebook. One only has to glance at the charts below to see the danger that a pricking of the social networking bubble could bring.

Anecdotal evidence points to a different story for your average social networker now has the easiest time in history finding new friends and exchanging ideas. The philosophy that has inflated the bubble was always very compelling .

But relying on a network that thrives on people adding their own media content is bound to garner more than one was bargaining for. Just look at the successive waves of negative responses that the facebook management fields after each update to its mainpage.

One thing is clear. At current search levels, if facebook were to go public, I am buying.

No comments: