The Future of Social Media: a Sustainable Boom or Impending Bust?

In October, Bloomberg Businessweek discussed the growing significance of social media in the corporate sphere. To illustrate, the article featured the following projection from the Winterberry Group:

By 2012, companies will couple the amount that they spend on online data to $840 Million-- more than double what was spent last year. This growth will spark an increase in the demand for social media analysts.

This article highlights how large market research firms are absorbing smaller social media monitoring companies to help clients effectively track their Facebook and Twitter use. For instance, in September, marketing research giant comScore purchased an Amsterdam-based analytics company for $36.7 million.

For businesses—especially responsible businesses, social media sheds invaluable insight into consumer preferences and attitudes. Through social media platforms, companies can engage in meaningful dialogue with their target audiences, and in a nutshell, social media enables businesses to listen, engage, share, and respond. For consumers and businesses—large and small, the relationship is mutually beneficial. For job-hunters, the numbers point to an evolving career landscape: a growing field needs people to strategize, implement, and innovate.

But is the social media field sustainable as a legitimate industry?

This Investopedia article says not necessarily—that the next dot-com-bust is on the horizon. The author, Ryan C. Furmann (CFA) cites the following signs as indicators of a collapse:

(1)Unproven business models: “most social media firms are trying to figure out how to capitalize on their vast user bases”
(2)Barriers to entry: social media businesses are easily replaceable by new technology and stronger products.
(3)Lack of business fundamentals: “little is actually known about the sales and profits of social networking companies”
(4)Illiquid securities: “social media firms don’t trade on public markets”
(5)Price rises: “values have risen rapidly”

Do these signs point to a second dot-com-bust? The answer is more nuanced than yes or no—

The argument can be made that we think about the dot-com-bust using the wrong analogy. Maybe the Internet wasn't a bubble. In fact, the industry is still here, growing and evolving steadily as it provides staple-services to consumers. Companies may have failed, but the Internet industry didn’t disappear—it transformed from an unchartered territory into a competitive and legitimate space for business. To make it in the Internet industry-- like any field-- a company needs a high quality product and a sustainable business model to win the marketplace game of supply and demand. Maybe it's better to think of the dot-com-burst in terms of a strainer that began the process of filtering the sustainable from the unsustainable.

Web 2.0 represents another transformation of the Internet industry, and social media is an example of the field’s continued evolution. Even though the field of social media is relatively new, in many ways, the Internet and social media have grown to become synonymous and inseparable. Instead of a collapse, what we’re observing is an industry that calls for creativity and innovation in a competitive space – where the product really does speak for itself. Social media will evolve, but the field won’t burst or collapse.

What do you think? What is the future of social media?

Photo Credit.
Bloomberg Businessweek Article.