The Social Media Bubble Starts to Burst
Posted by Rant4u
Score one for the Luddites: Social media really does seem to be overblown, at least as a business proposition.
The Facebook initial public offering earlier this year was supposed to mark the launch point for a new social-media infrastructure that would soon dominate our lives the way Google, Microsoft and Apple do now. Instead, Facebook and its brethren seem to be in retreat, as the market punishes them for underperforming.
In its first earnings announcement since going public, Facebook announced respectable growth in its user base and in year-over-year revenue, while meeting Wall Street’s modest expectations for earnings. But its profit margin declined from a year earlier, and it failed to deliver the kind of explosive growth many investors expected just a couple of months ago, The company’s rapidly slowing growth makes it highly unlikely to be the next lighter-than-air technology titan.
Facebook’s abrupt comedown makes it an easy target, yet several other social-media firms are also reeling. Here’s how thestock prices of some prominent tech firms have fared since going public over the last 14 months:
Facebook (IPO date, May 17, 2012). Stock down 26 percent.
Zynga (December 15, 2011). Down 69 percent.
Groupon (November 3, 2011). Down 66 percent.
Pandora (June 14, 2011). Down 43 percent.
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