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From Dot-Com Bust to Social Commerce Boom, Which Way from Here

Groupon social media deal site changes business online

Groupon Rejects Google's Billions

So it didn’t quite stick- sounds like the rejection Groupon pitched Google this week is making a lot of noise in the headlines. It seems Groupon took a chance by shying away from the search giants $6 billion dollar offer. With most of the Groupon deals being based on a 50/50 revenue split between retailers, the online localized deal sharing site feels it just might have what it takes to get more value out of the business without Googles $6 billion dollar offer up front. Sure the deal site did make more than $1 billion dollars on its second year as a start-up, which is quite impressive, but how is little localized Groupon going to continue this huge momentum into the new year, and beyond.

It is a very interesting situation to watch social media become a valuable part of generating revenue. Lets take Groupon for example- if friends get great deal offers in their city, then they share it with other friends to get enough people to buy in, so everyone wins a Groupon, or great deal for something they all love in their town. This localized deal site is designed to be shared and valued by people who use social media outlets, like Twitter, Facebook and even email to share information and obviously deals, leading to Groupon’s $2 billion in profit!

Now allow me to tie this altogether, and let you know why I am somewhat of a skeptic about social media and e-commerce merging (to be called “social-commerce“). When this occurs, as it is almost in full bloom, the market run’s the risk of another dot-com bubble bursting right before our very computers. News and media alike keep talking about the “value” of sites like Facebook, Twitter, and now Groupon.

Dot Com Bubble

NASDAQ March 2000 Peak- Dot-Com Bubble

So it occurred to me that this was a familiar scene of excitement born in Silicon Valley in the late 1990’s when the market “valued” these emerging dot-com start-ups, much like a Groupon or Facebook,  with such high ambition. Yet after years of huge profits, these companies took a dive as a result of under-performing world markets and the bubble finally burst. We saw many sorry investors, such as myself, who were hard hit by the bubbles nasty mess. Losing pensions, homes, and above all tons of jobs, the market value of these start-up dot-coms wasn’t quite what everyone speculated.

The dot-com experience was a serious reality check for many business owners and investors, so I remain skeptical and approach the social media arena with extreme caution. If the economy doesn’t eventually rebound (9.8 still unemployed), will Google, market analysts and consumers still appraise these companies with the such high value. Before we let the bubble get too big let us honestly ask ourselves what it is that makes Twitter or Groupon or Facebook worth $40 billion dollars? I’ll be the first to tell you, its the people on there- like you and me. So unless we suddenly stop going on these social sites– like we did to MySpace, now revamping its image – then companies like Groupon, standing its ground to reject Google’s $6 billion, may very well see the social media bubble come into full blossom.

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9 Responses to “From Dot-Com Bust to Social Commerce Boom, Which Way from Here”

  • Social media skeptics Says:

    http://dealbook.nytimes.com/2010/12/03/a-silicon-bubble-shows-signs-of-reinflating/?hp it’s so funny you write this especially after I just read this deal book article with a simiar opinion and facts to back up that venture capitalists, like Chris sacca, are slowing investments until market valuations are more stable.

  • seo consultant of the sea Says:

    refining my way of thinking about social media is a good idea- so i am glad you took a stance. We all have a thing or two to reconsider before putting out investments all back into tech. If there is not a market to support it, then how will these VALUED interests sustain, survive and keep a return on investment.

    I appreciate your opinion column on tech and digital media.

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    Hit me @GrilStuff on Twitter.

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