"At the end of the day, social media is simply middleware for connecting people," said Dean M. Wright, founder of the social data and research company BrandMixer LLC. "The only true competitive advantage Facebook has right now is scale."
But even if you could compete with Facebook, would you want to? Five years ago, the demand side of the economic equation dropped MySpace like a bad habit in favor of Facebook. Now, increased concerns overs privacy issues have Facebook confronting new challenges, most notably from Twitter, Google+ and 2012's breakout hit of a social network, Pinterest.
"Social media users are capricious and demanding: the downfall of MySpace, the surge of Google+, the soup du jour of Pinterest," Wright said. "But the number one driver of the frenzy is that all of these networks are free to the user."
So you might not want to start a social network. But you don't have too long to think on it, according to Suki Shah, cofounder and CEO at GetHired.com, who says now is the best - and perhaps last - time to get in the game.
Shah describes himself as a serial entrepreneur. He said Facebook's acquisition of Instagram showed investors and entrepreneurs that the landscape has shifted in favor of startups that can attract millions of users.
"It's a great time to be an entrepreneur in Silicon Valley, and Facebook's acquisition of Instagram has just added fuel to that fire," Shah said. "Whether or not a 'social media bubble' becomes inflated or pops as a result, now is the time for entrepreneurs to take full advantage of the market conditions to gain access to capital. The $1 billion price tag of Instagram definitely piqued the interest of angel and institutional investors, and has made them more open to meetings with early-stage companies."
The problem for some investors, of course, is that "users" in the social media landscape rarely mean paying customers. The entire industry - and the entire bubble, if you believe we're in one - relies on a business model where users get online content for free.
Shah expects the end result to be Facebook taking advantage of the current social media frenzy to fill gaps in its overall strategy.
"Small teams of smart, dedicated, entrepreneurial people are creating significant momentum and innovation in niche areas that really appeal to larger companies," he said. "Regardless of what will happen in the future, serious entrepreneurs need to use this time to set sail."
Coming Tomorrow: No, We Are Not in a Social Media Bubble
Image courtesy of Facebook.
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