Social media: Is it a bubble and will it burst?

Over the past few years, social media has ballooned from being a small, emerging niche into a major force in the online marketing and advertising space. However, those who lived through the dotcom boom-and-bust cycle can’t help asking whether we are about to see another bubble burst.

After all, the hype about social media has quickly become inflated, more brands are throwing resources into interacting with customers on social media, and there is still no real clarity about how most social networking sites are going to monetise the massive user bases they have built, outside of advertising.

At what point, ask sceptics, will investors become unwilling to pour their money into these websites? When will brands start to become disillusioned with their returns from advertising on social networks and using them as platforms to interact with their customers?

When will users start leaving social networks in their droves, either out of boredom or because of concerns about how their confidential data is handled by websites such as Facebook? The fact that an increasing number of people are asking those questions certainly seems to indicate that the social media market will soon go through a period of readjustment.

Socialbakers, a Facebook analysis site, reveals that there were 1-million fewer people on Facebook in the UK during January, which was a drop of 3.65 percent. There were 90 000 fewer users in France, down 20 000 in Italy and Canada was down by just over 400 000 users. Is this the beginning of a significant trend?

However, I don’t believe that we’ll see the bubble burst as dramatically as it did in the early 2000s when the dotcom market imploded. Instead, we’ll see businesses and consumers alike gradually integrate social media into their everyday lives until it simply becomes one of the many channels they use for everyday communication. I’d describe that as a market normalising rather than as a bubble bursting.

There are a number of reasons that the bubble will not burst dramatically as it did during the dot-com collapse, starting with the fact that the barriers to entry into social network are relatively low for most brands.

Advertising on Facebook isn’t prohibitively expensive, neither is it difficult or costly to set up a profile on Twitter. Most brands could easily cut their losses and disengage if they had to. Rather than fretting about whether social networking is a bubble waiting to burst, companies need to look at ways to put social networks to work for them.

One of the reasons that we might go through, what IT research company Gartner would call “a trough of disillusionment” in the social networking arena is simply that many brands are not leveraging it as effectively as they could.

Social media is a great channel for starting relationships with customers and a good one for maintaining (sometimes even repairing) relationships. It’s also good for holding conversations with customers and influencers, using software such as CoTweet.

This is important customer relationship management work, yet many businesses have outsourced social networking interactions to a PR agency. Other have tasked a junior staff member with looking after this function, reasoning that someone from Generation Y will “get” this social networking stuff.

Organisations should instead be treating it more strategically and aligning it more closely with their other marketing and customer service channels.

That doesn’t mean that they should over-invest in social media or overvalue social media relationships, but simply that they should manage it as a part of the business.

After all, Facebook recently passed the milestone of 500-million users worldwide. Social media might not be the only part of the online landscape, or even the most important one, but it certainly looks like it’s here to stay.