Wednesday, January 27, 2010

A Social Media Bubble - Web £2.0

The more I think about it the more the current social media buzz and pre-revenue investment activity has worrying parallels to the dot.com bubble bursting. Add to that businesses spending time and resource on social media without a strategy or purpose and I think there is potential for another burst.

Many businesses including Twitter (don't forget it is a business) have operated for substantial times with huge net loss to gain market share. Large scale investments (Twitter are rumoured to have received $55m in investment) in pre-revenue Internet businesses to gain market share was one of the main pre-cursors to the dot.com bubble bursting and I believe that many social media start ups and service providers who are pre-revenue are precariously placed.

Look at video streaming start up Floobs, great name and great service but they are rumoured to be filing for bankruptcy despite signing up major Spanish football clubs.

There is also momentum towards paid for content on the web, which will inevitably have an impact on social media. The NY Times becomes the latest news and media company to start charging for content - showing that monetisation is critical to the future of web 2.0. Moreover, the Mirror becomes the latest newspaper has recently blocked a news aggregator from linking to its site and it is all about protecting revenue.

In addition organisations are re-thinking what they allow people to access via their networks. For example Oxford Uni bans Spotify from its network. This will not please the owners (or investors) who rely on advertising to fund the royalty licences to make the service legal.

So if Twitter fails to sufficiently monetise without alienating all of its dedicated users then this may be the tipping point for another .com decline. There are also other signs of a bubble under pressure: ebay sales are in decline: google is facing challenges on its Adwords platform in the ECJ and Twitter user registration growth has a slight dip.

The push must be to monetize web 2.0 so that the platforms we know and love are maintained and innovation is fostered and keeps developing.

Monetisation and revenue protection is critical to the maintenance of Web 2.0 and the move to Web 3.0 and the Internet of things. Which is why I am coining the phrase Web£2.0 or Web $2.0.

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