Social Media Bubble Bursting—-Now Comes The LinkedIn Fiasco

By Mark St. Cyr

As the news of the day will certainly contain the debacle being witnessed in the share price of LinkedIn™ this morning, I thought I’d post a few quotes and previous links to articles where I warned of exactly what has taken place for newer readers. There are more but these cover the pertinence of the theme. To wit:

From the article “Linked Into What Exactly?” February 14, 2013

“Here’s something I know first hand from real people. Every single entrepreneur or business owner I know has either never visited the site again after signing up. Or, stopped responding to invitations of linking because; not one of these ever resulted in a worth while business opportunity. Ever!

I know some that have posted directly onto their info the equivalent of “No collaboration offers need apply.” Because that’s all they’ve ever received. Offers of collaboration that resemble offers more in line with letters from a Nigerian Prince. When they ask me what I did with my account and I say: “I deleted it.” the most common response I get is: “Yeah, I think I’ll do the same next time I remember. Only for not remembering is their info still there.”

From the 4 part series “Gauging The Gauges” January 9, 2014

“I have stated for years: “The only ones making money from social media, are the ones selling people the idea they need social media.”

Just look to, or remember all those stories that are consistently thrown across the financial media and others. All those buzz terms like: “user generation, followers, likes, connections,” and more? All touted as “The” metrics of relevancy for anyone using or purchasing. Now? Seems what’s needed for tangible, reliable, clear metrics is moving from the asking stage – to the demanding stage.”

From the article “Welcome To A New Normal Earnings Season” October 7, 2014

“With the Federal Reserve’s QE policy set to end this month all these “new economy” juggernauts are going to have to prove that giving away the store for “free” as to entice users, customers, and more; will have to prove they have the ability along with the quantifiable hard numbers accompanied by real “cold cash” they can pay those promised returns to Wall Street.

If this proves to be the case the term “trap door” will not be used in reference to some new gaming app available. It will be to describe serious consequences to people who assumed investing in these markets has been nothing more than a game to be played by “players.”

Just watch how fast the “players” in the world of algos and High Frequency Trading can change the meaning of “liquidity trap” when they decide – it’s not in their best interest to play.”

From The article “To Social Media’s Horror – It ‘is’ Different This Time” August 2, 2015

“Or maybe you’re one that couldn’t wait to sink your 401K teeth into LinkedIn™.  Once again, after years of pushing higher, and higher, it seems the new story is same as the “old story.” i.e., They seemingly needed to spend money as to gain potential “integration opportunities” by buying something (e.g. $1.5 BILLION for Lynda™) rather than investing directly and maximizing everything of what LinkedIn currently is involved in. i.e., A glorified resume writing and/or job seeker data base.

In other words: They can’t make money via the old model as to warrant their current valuations. So, instead of doing what they do, and doing it better, enabling higher net profits. It seemed they had better buy something that can. Even if the price paid (again a reported $1.5 Billion) is money spent not from net profits – but from Wall Street’s pocket.”

As I write this (in the pre-market) LinkedIn’s stock price overnight has plummeted by over 30%. That’s not a typo.

If you are one of the fortunate to have not owned any shares currently – I want you to think about it this…

Exactly how do you think this latest debacle is going to be viewed by anyone who still owns shares or, is holding them in lieu of a salary in the now myriad (Twitter™, Square™, LinkedIn™, Pandora™, etc., etc.) of value purging, net worth shattering “social darlings?”

Add to that: How do you think the people not only currently working in these “social darlings” but rather; the ones hanging their hopes and dreams of “Silicon Valley” riches that maybe living in some shipping container as they await their envisioned “payday” to arrive? How do you think this latest debacle will be viewed in connection with all the others as of late?

And what about the “investor class?” What do they now do? Remain invested? Invest even more? (Whether in these or any others.) Truly think about that. For suddenly “On sale at great prices” has morphed into “Do you dare to catch the falling knives?” and now “Will I be solvent by morning?”

But not to worry I guess. After all, Mark Zuckerberg just touted for the $19 BILLION dollars he spent of Wall Street’s money for WhatsApp™ it now has 1 Billion users. Doesn’t make a net profit or anything close, but hey, it’s all about eyeballs, right? Money and profits are secondary unless – Wall Street comes back looking for their promised riches. And they always come looking. Sooner, or later. Don’t they.

Source: A Few Past Links, To Link Up My Thoughts, On LinkedIn – Mark St. Cyr