What is the Half Life of Social Media?

What is the Half Life of Social Media?

MySpace and Friendster are the fossils of the digital age.  Just as paleontologists hypothesize about whether asteroids killed the dinosaurs, we now wonder how Justin Timberlake ended up as part owner of a company that was once bought by News Corp for $580 million.  Or how a site with over 115 million users decided to abandon social networking altogether to focus on gambling in Asia.

The rapid rise and fall of Stone Age social media is sobering, and it makes for chuckle-worthy nostalgic copy.  But is it fair to use it as a cautionary tale for today’s companies?

The jury’s still out on whether the social media giants we use today will follow their predecessors into oblivion or obscurity.  They say that Facebook is losing teens in droves.  (Or not.)  The number of inactive Twitter accounts is rising.  Instagram and Snapchat are the current social media darlings, but the sniping stories about an inevitable decline are always circling.

If stock prices are any indication, markets have long been skeptical about the business end of social media.  Facebook’s stock languished below its IPO price for a year and three months.  While the stock has since doubled, growth has been far more sluggish than the wild expectations set by Google and other mega-IPOs.

Twitter hasn’t fared much better – despite occasional surges into positive territory, the stock price is now down over 30% from its IPO back in November 2013.  Snapchat’s theoretical valuation continues to climb, but only an IPO or acquisition will reveal its true worth.

None of this necessarily adds up to the inevitable (or even imminent) decline of social media.  People still use social media quite a lot, and the business value created by that use remains considerable.  Sure, there are people who have gone cold turkey.  And there are people who realize that the whole thing is a waste of time.  But they are in the minority.

What the evidence does suggest is that social media is a business ripe for disruption.  Fickle consumer loyalties in the social media space are likely to continue as the critical mass of different sites rises and falls.  Then there’s the logic (immortalized in “The Social Network”) that social media sites will become inherently uncool as they pursue profitability.

Still, today’s social media CEOs also have the benefit of hindsight – there are plenty of potential coping strategies.  They can diversify as a hedge (Facebook buys Instagram).  They can ride the wave on their own (Snapchat turns down an acquisition by Facebook).  They can create their own platform (Google+).  The natural cycle of a social media company may be short, but there are certainly ways to extend it.

The business side of social media attracts more than its fair share of doubters, yet it’s far from inevitable that the hubris and mistakes of the past will be repeated.  Investors may keep social media on a short leash, but they’d be wrong to put Justin Timberlake on speed dial quite yet.