Recent corporate activity in the social media space shows that the appetite for businesses that are either pre-revenue, or generating limited revenues has regained momentum. Whilst Dot.com 1.0 was all about getting eyeballs not revenue, and there appear to be a few social media deals valuing access to our social networks this time around.
LinkedIn is trading very positively after it’s much anticipated IPO, Twitter just bought TweetDeck for $40m, and of course Microsoft has just spent billions of dollars on Skype in a move that has much of the Technorati confused at best, and aghast at worst. The big question is whether these deals reflect another boom & bust cycle for online services, and if they sneeze, will everyone in the technology space catch a cold?
Add to this the interesting fact that the most valuable tech firm globally (Apple Inc in case you were wondering, currently market cap $305.1bn) has been restrained regarding M&A activity and focussed instead on building great products that people are willing to spend hard cash on.
It is reasonable to expect that some valuations are unsustainable, and have to calm down. However, the majority of technology services and software firms have their feet firmly planted on the ground, and are intent on delivering value to their customers and revenue to support their businesses. Global demand for data centres continues to grow unabated, predominantly for delivering business applications and services, not for the social media junkies. And the hype around cloud is maturing to a discussion about the value of private cloud solutions that can support growing businesses but maintain the diligence, compliance and service levels necessary for the mid-market.
In short, it is not likely that we should worry about a few over-valued social media firms, as the technology services that underpin much of the global economy today are now part of our social and economic DNA. It’s all here to stay.