Social Media Bubble Pops Before It Fully Inflates

bdking writes "Groupon's IPO plans are melting down. Facebook has pushed back its IPO to next September. And now Zynga reports a 95% reduction in sequential quarterly profits. So much for the social media IPO bubble." At least everyone is getting let down before a lot of people lose a lot of money this time around.

Re:Silly reporting

[AdmiralXyz]

Then would you care to enlighten us, O Wise and Powerful AC? Zynga's quarterly profits went from $22m to $1m in a quarter, and thanks to the SEC we've discovered Groupon has never made a profit at all. But please, tell us why these metrics are worthless and these companies are still hot stock picks.

Anti-Social Networking

[Armandoban]

Even the most computer illiterate among my friends and family are starting to talk about privacy invasion, enforced sharing, and lack of control over their personal information. Facebook's "ticker" has created a new world of raging confusion. The anti-social networking mentality is hitting the mainstream..

Money burned elsewhere

[prefec2]

The money for the last New Economy bubble was created to counter measure a previous bubble collapse. The fed reduced the interest rates to pump more dollars into the market. That worked perfectly. And the money had to go somewhere. And that somewhere was the New Economy. This time they burned the money in that finance crisis and housing thing. And reduced the interest rates again. However, this time the economy is in such a bad shape due to the financial crisis and the money problems in the Euro-zone and of course the trouble with the US budget keep the banks from "investing" so IPO for the web 2.0 companies is not such a good idea at the moment.

Re:Zynga?

[Cinder6]

Two problems with Groupon that I've seen after briefly subscribing to it:

1. It's convoluted to see deals without subscribing. I imagine there are people out there who would be interested, but don't want to give out personal information.
2. Who can blame them? Most of the deals sucked in my area. This is one place where targeted advertising would be great--I specifically signed up to receive ads! Instead, I got an ad for pole dancing. As a male, I was not very intrigued.

Re:Silly reporting

[rnswebx]

Regarding Zynga, how about doing as suggested and read the details? (I won't comment on Groupon, as I've never believed in their product at all)

Their quarterly revenue actually went up by more than $30M over the previous quarter; $279M vs $242M. They didn't launch a new game the entire year, until May 31st. (one month before the end of Q2) Since then, they have also launched a new Indiana Jones themed game, Adventure World. Keep in mind that Zynga will be one of the early players on Google's new social network, already launching their biggest game, Cityville, on the platform.

They had higher than normal hiring expenses, including a $10M payment as part of an executive's sign-on bonus. They also paid out $10.6M in a stock warrant. Both of these are quite likely to be one time events, and neither of them made many appearances in the media. If you take those two payments out, you are back at ~$22M in profit, which would be an increase in year over year, and almost double Q1 2011's profit of $11.8M. My source [businessinsider.com] outlines most of this for you, in case you'd rather not read through the details yourself. I knew the Q2 2011 profit number, but here is another source [gamezebo.com] for you to check out in case you don't believe me.

Flailing at the Wind

[Scot Seese]

Facebook is - or soon will be - flailing at the wind. Fighting an opponent they can't hurt.

Facebook is now facing a competitor that can afford to earn $ 0 from social media.
Facebook's survival depends on the popularity and eyeball count of Facebook to sell ads and revenue share (Zynga) agreements against.

Google, currently earning as much profit per month as Facebook earns per year, does not need Google+ to earn three cents in order to continue flourishing. While they would LIKE Google+ to be a runaway hit, it simply isn't necessary.

Once Google starts aggressively advertising Google+ on television, stealing 10, 20, maybe 30% of Facebooks' traffic, how will Zuckerburg feel then? Probably like the guys at Netscape after Microsoft purchased Mosaic, rebranded it as Internet Explorer and started giving it away for free.

Facebook's UI is a mess, it's privacy and security settings are not intuitive and the entire user experience feels stale and worn-out to many people I've talked with. The massive redesign that Facebook is preparing to launch, with Timeline and other UI tweaks.. while satisfying some, will probably feel like "work" to many - something new to learn, for what was supposed to be a simple, fun way to keep in touch with friends.

If Google has half a brain, they will ascertain the date of Facebooks' relaunch and start a massive national ad buy for Google+ starting two days prior and run a solid week after. Clean, simple, secure microblogging with video and photo photo sharing. They will steal millions of users.