Social media stock bubble

The social media bubble is a hypothesis stating that there was a speculative boom and bust phenomenon in the field of social media in the 2010s, particularly in the United States. The Wall Street Journal defined a bubble as stocks "priced above a level that can be justified by economic fundamentals,"^[1] but this bubble includes social media. Social networking services (SNS) have seen huge growth since 2006, but some investors believed around 2014-2015, that the "bubble" was similar to the dot-com bubble of the late 1990s and early 2000s.

In 2015, Mark Cuban, owner of the Dallas Mavericks NBA team and star of the TV show, Shark Tank, sounded an alarm on his personal blog over the social media bubble, calling it worse than the tech bubble in 2000 due to the lack of liquidity in social media stocks.^[2] A year prior, however, Cuban told CNBC that he did not believe social media stocks were on the verge of a bubble.^[3] In a letter to investors in 2014, David Einhorn, who runs the hedge-fund Greenlight Capital, wrote that "we are witnessing our second tech bubble in 15 years."^[4] He went on to write, "What is uncertain is how much further the bubble can expand, and what might pop it." Einhorn cited several factors supporting the existence an over-exuberance including "rejection of conventional valuation methods" and "huge first day IPO pops for companies that have done little more than use the right buzzwords and attract the right venture capital."^[4]

Since those claims, services like Facebook, Twitter, Instagram, and Snapchat have grown to become multi-billion-dollar corporations generating enormous revenues,^[5] though some continue to lose money.^[6]

Social networking services have grown and evolved with time since the launch of SixDegrees.com in 1997.^[7] Cutting edge at its time, SixDegrees.com allowed users to create a profile, invite friends, and connect within its platform. At its peak, SixDegrees.com had more than 3.5 million users. Between 1997 and 2001 more social sites aimed at allowing users to connect with others for personal, professional, or dating reasons.^[8]

Friendster and MySpace were next to enter the social SNS arena, followed by Facebook in 2004. Even though MySpace had a following of more than 300 million users, it could not compete with Facebook, which now has overtaken the social networking world. However, as development of SNS started to emerge, a market saturation began to take effect.^[9]

Some classrooms have begun to incorporate technology in daily learning as well as social channels specific to student's course work. Traditional social media sites are used, as are educational oriented sites such as ShowMe and Educreations Interactive Whiteboard.^[10]

While SNS continue to play an influential role in helping people form real-world connections via the Internet, renewed concerns over the social media bubble have surfaced due to recent controversies. These threats include growing concerns about breaches in data, the rise of bot accounts, and the sharing of fake news on SNS platforms. There are also concerns that big data figures associated with these SNS are inflated or fake,^[11] as well as worries about the role the platforms played in national elections (see Russian interference in the 2016 United States elections). These issues have resulted in a lack of trust among the sites' users.^[12]

• Echo chamber (media)
• Dot-com bubble
• Web 2.0
• Digital Revolution