Facebook, Groupon: Is The Next Tech Bubble Social?

Many of the hallmarks of the 2000 dot-com bubble seem to be present again, what with Goldman Sachs' interest in Facebook, the mind-boggling valuations of Groupon and Living Social, and the growth of the mobile app industry. For insight, host Liane Hansen talks with Beverly Macy, CEO of Gravity Summit, author of The Power of Real-Time Social Media Marketing and a distinguished instructor at UCLA Extension.

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LIANE HANSEN, host:

Call it yet another sign of Facebook's dominance in the social media world. This past week, the website MySpace, Facebook's one-time rival, announced it was laying-off nearly half its workforce.

The collapse of MySpace comes at a pivotal time in the dotcom world. Private investors have hundreds of millions of dollars riding on the success of such popular social media sites as Facebook, Groupon, Living Social and LinkedIn.

Industry watchers say another investment bubble could be brewing, much like the one that gave way to the dotcom bust at the beginning of this century.

For insight, we've invited Beverly Macy to our studios here in Washington, D.C. She is CEO of the social media marketing conference Gravity Summit and the author of "The Power of Real-Time Social Media Marketing. It is so nice to meet you, Beverly.

Ms. BEVERLY MACY (CEO, Gravity Summit): Nice to be here.

HANSEN: Let's begin with the MySpace news. After announcing the lay-offs, News Corp, the media conglomerate which owns MySpace, said it's considering selling the site. Is the site worth buying?

Ms. MACY: MySpace is one of those stories that everybody is watching with great interest. It was the king of the roost for a long time and they had a great audience. And social media is all about finding the audience and then meeting them where they want to be met. And MySpace grew and grew and grew, and now it is on the decline.

Will we see it totally die out? That remains to be seen. So, we'll have to watch and see.

HANSEN: Let's talk about Facebook because it reportedly raised $500 million from the investment firm Goldman Sachs and a Russian investor. And the deal values Facebook at $50 billion - which means it's worth twice as much as Starbucks and Dell. What's going on?

Ms. MACY: Well, what's going on is 500 million users and growing - 600 million now. There is a phenomenon brewing. We are seeing a seismic shift in how people are communicating. And Facebook has really tapped into to the desire for people to connect, to do more than connect about their plans, et cetera. And now they want to shop on Facebook, they want to transact on Facebook, they want to share photos, they want share their lives.

But businesses are also looking at this. It's very exciting and we're just at the very beginning.

HANSEN: But what does it mean that a company like Goldman Sachs is reconsidering social media as a business practice?

Ms. MACY: Well, that in itself is probably the most stunning part of the news. They put money to work in places that are going to absolutely pay off. So, they must know something that everybody else should get on board with. I think businesses are going to take a second look at Facebook as a platform, social media as a new operationalized business process, because they don't want to be left behind.

Something's going on and this will cause people to really take a look.

HANSEN: Groupon, which is the online coupon site, said it closed a round of funding worth something like $950 million. The company had turned down a $6 billion acquisition from Google. Can you explain why a company like, well, Facebook but Groupon could be worth that much money?

Ms. MACY: Well, again, probably we're going to look back and say they were smart to turn down the six billion. That's hard to even say those words. Groupon also has tapped into something that is absolutely lighting a fire. People love to get a deal and it turns out they like to get a deal together. And Groupon really hit a magic formula.

They believe that they're just at the beginning of really a whole new business process and a whole new revenue stream. And I think they're right.

HANSEN: Getting back to possible clouds on the horizon, the difference between the tech bubble 10 years ago and now is that this time the companies are privately held. Do you expect them to initiate public offering?

Ms. MACY: Well, the whisper is that Facebook will be going public in 2012. We will see. The private offerings that's going on, that's getting a lot of news, you're absolutely right. I think the lesson learned from the dot-com bubble is a couple of things, one of which is you've got to have revenue and be a real business in order to go public. A lot of companies went public and then had to go private or had to totally delist off the stock market, et cetera.

And these companies are earning revenue and they're going to continue to earn revenue, so they can take their time. But we will see companies absolutely hit the ball out of the park. We'll see a couple of failures along the way, as well.

HANSEN: Beverly Macy is CEO of the social media marketing conference Gravity Summit and author of "The Power of Real-Time Social Media Marketing," and she joined us here in our Washington, D.C. studio. Thank you so much, Beverly.

Ms. MACY: Thanks for having me.

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