Has the Social Media Bubble Popped, or is the Real Bust Coming?

Whether we have been in a new Internet bubble like that of the years leading up to 2001 is a matter of huge dispute. Some might argue, based on the Facebook initial public offering, that the bubble already has popped. Others might argue the bursting bubble is yet to come. 


The argument that Facebook being the worst IPO of the last decade is a harbinger, but not the bursting bubble. That will happen only when valuations of most other firms with a social element also crash and burn. 


To be sure, some have been sounding the alarm for a year or more. "We’re now in the second Internet bubble," said Steve Blank, a serial Silicon Valley investor. 


The signals were that "seed and late stage valuations are getting frothy and wacky, and hiring talent in Silicon Valley is the toughest it has been since the dot.com bubble."


"The most telling indicator [of a bubble] is the $1 billion-dollar valuation," Gartner's vice president Ray Valdes recently argued about Facebook's purchase of Instagram. "Two- and three-person Silicon Valley startups [are] getting venture capital funding within days or weeks, rather than months, for stuff that is more of a feature than an actual product," he noted. 


Some of us would argue the bubble hasn't burst yet. You'll know when it does; it won't be a debate.