June 16, 2008
Cracks are emerging in the social networking bubble that has been puffing up for the last year or so.
Facebook’s crack-down on app-spam has dampened the previously euphoric growth of many social app companies, and their impending site redesign should accentuate this.
GigaOm’s post yesterday, “Social Networking Gets a Sanity Check,” seems to have struck a chord in the blogosphere, confirming that the bloom is falling off the social network rose.
No doubt this will lead the skeptics will be coming out of the woodwork jumping on the “told you so” bandwagon.
All this has me more encouraged than ever about investing in social media and social networking opportunities. A trimming of the excesses won’t, I believe, reverse the trend of the web becoming a fundamentally social medium, nor will it erase the opportunity that exists for those who figure out how the social web will work.
What will happen? Terms and valuations should recede to almost-reasonable levels for brand new startups which show promise but also lots of uncertainty and risk. Good ideas will be less likely to find competition from a slew of venture-backed competitors. And, perhaps most importantly, focus will return to basics like execution, team building, capital efficiency and business model, as opposed to land grabs, hype and acquisition strategies.
Sounds OK to me.