What the Past Tells Us About the Future of Facebook, Groupon and Twitter

With Billion-Dollar Dot-com Valuations Back in a Big Way, It's Time for Alarm Bells to Start Ringing. Anyone?

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Bernhard Warner
Bernhard Warner
Matthew Yeomans
Matthew Yeomans
The news that Facebook and LinkedIn are preparing to take their shares public has created a froth of both investor and media excitement. Facebook's projected $50 billion valuation would be more than Starbucks and Dell. Combined! And the head-scratching headlines don't end there. Groupon easily raised $950 million earlier this week on the back of a business model -- group buying -- that cost Paul Allen millions in the late '90s. Remember Mercata, anyone?

With these billion-dollar-plus dot-com valuations once again the talk of the town, it didn't take long for our internal alarm bells to start ringing. So we decided to take a trip back through time to see if history can teach us anything about the current social media investment frenzy. What we found through the maturation of many social-media technologies and sectors was a four-part process. First step is the promise of first-mover status. Next comes the media embrace of the rival -- oftentimes, a bigger, better funded challenger -- that can often feel like strangulation. Given enough time, what emerges is a true innovator that helps cement real market dominance and grows the sector. But, as with so many tech stories, there always is a future shock waiting just around the corner.

Blogger, LiveJournal, MySpace, Mercata, Picasa, Friendster and even Walmart are part of the historical narrative we ended up sketching.

You can see the whole story on the presentation. The story is far from over. Let us know what other social-media sectors we should document.

Bernhard Warner and Matthew Yeomans run the editorial consultancy Custom Communication and are co-founders of Social Media Influence.
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