Rufus Jay has written an article in this week’s Marketing Week that has raised some questions as to whether social networks will ever raise any real money.
He points out that although YouTube is huge in popularity and quickly becoming synonymous with user generated films, it’s still not really making much profit and this could soon mean we see a new dot.com crash.
Google, paid a whopping £853m to buy YouTube back in October 2006 but it’s only expecting to make £100m from advertising this year.
Other sites have also reported problems too with News Corp reluctantly reporting that revenue targets will be missed by MySpace.
Rufus ends by saying: “The acquisitions of YouTube, Bebo and MySpace may represent small drops in the ocean for their cash-rich owners, but increasingly there is a sense that such money has been flushed away, and that perhaps Facebook should have sold more of its equity earlier.
“The days of the megabuck valuations for such sites are over – for now, at least.”
I think it’s true that a number of social networks, newspapers and online magazines are finding it increasingly difficult to create new revenue streams from their content.
I also believe prices for anything from petrol, houses, food, cars and yes companies were all higher 6-12 months ago because people could raise funds and everybody was looking to invest. However, I don’t think this money has been flushed away and this is another .com crash. This is simply down to our economic conditions and companies looking to reduce their advertising and marketing spend – in my view wisely!
The original .com crash was caused by a plethora of flawed ideas/business models, non-existent customers and the common belief that if you put a website on the internet you are immediately going to have seven billion customers buying your services.
Surely, today’s investors have learnt from their previous mistakes.
Chris Norton is the founder of Prohibition and an award winning communications consultant with more than twenty years’ experience. He was a lecturer at Leeds Beckett University and has had a varied PR career having worked both in-house and in a number of large consultancies. He is an Integrated PR and social media blogger and writes on a wide variety of blogs across a huge amount of topics from digital marketing, social media marketing right through to technology and crisis management.
