• by Jeff Hirsch , April 23, 2014

Emerging media channels and technologies often follow a similar path — establish a value proposition, gain buy-in, experience rapid growth and then level off while it finds its footing. After hitting their peak, these channels inevitably reach a point of diminishing returns or encounter scalability issues, and this is when they finally settle into their roles as part of the marketing mix.

For example, display was the standard in online advertising for several years, but the emergence of search giants Yahoo and Google promised a solution that weakened returns from display and search became the channel of choice for the entire industry. The explosive growth of search made display obsolete, and it maintained that market share stranglehold for many years until it eventually leveled off. 

Social media is the most recent element in both the ad industry and consumer zeitgeist. Following the explosion of social-media adoption in the late ’90s and early 2000s, the advertising industry finally caught on that “those sites for kids and cat videos” could actually become a viable marketing channel.

For the last several years, there has been a constant scramble by brands and marketers to stay on top of the quickly evolving social media space.

But now, as the market has become flooded with social media marketing solutions and providers, the ad industry is fast approaching the tipping point of inevitable decline. When overall market demand is skyrocketing, it’s easy to sell futures even if you don’t quite have the talent and technology to back it up. Accordingly, the VC community, saw piles of money to potentially be made, scrambled to invest in social media start-ups.  We’re also seeing that not every company makes it to their exit strategy, or even their profitability stage. 

That downturn in demand is about to get steeper. It looks like the end of the market boom is coming, and here are some of the signs that the social media bubble will burst.

Rise in Comprehensive Media Platforms  – Following the wild success of the first social media start-ups, it didn’t take long for industry heavyweights to take notice and want in on the action. Google has made the largest grabs at market share with Google Plus. But throughout the industry, social media has woven its way into the fabric of companies’ infrastructures in some way or another. Market research and analytics companies incorporate social listening, programmatic platforms and DSPs include social media insight in their databases and apply it to campaigns regularly. Once social media capabilities can be offered in-house, start-ups begin to lose foothold.

Reduction in Emerging Social Media Technologies  – We’ve seen a sharp decline in the quantity and quality of emerging technologies in the social media space in recent years. Niche networks have seen some success, but none can stand up to the juggernaut that is Facebook.  Social app development companies began to reach critical mass and mobile is the hottest investment space for VCs these days. There just haven’t been any real game-changers recently, which begs the question: How much longer can the social media market maintain its growth rate?

Growing Concern over Information Collection Practices in the Social Media Space – Between Facebook, Google and the NSA, consumers are growing more wary of sharing info via these sites, and while they’re getting more tight-lipped online, they’re being quite vocal with their government representatives. It’s only a matter of time before Congress will have to wade into the social privacy debate.

Market Projections of YoY Growth are Dipping – A 2012 eMarketer report noted that social-media market penetration had hit a plateau after experiencing several years of double-digit growth. Their own growth rate projections had dropped to 1% by 2014. Interestingly, that plateau was predicted by DataMonitor five years ago.

Since 2007, we’ve known that this bubble could only get so big, and it seems those predictions are being played out. However, this doesn’t mean that social media is dying, or even in any danger. As a tool in the digital marketing arsenal, and as a pillar of modern-day communication, social media isn’t going anywhere. It will continue to see a more moderate pace of growth and settle into its well-earned place in the standard marketing mix.

But potential investors in both the VC community and public stock markets should be more cautious about who they invest with, rather than blindly throwing as much money as possible at what once seemed like a sure winner. Now, wild success is much less likely unless you’re bringing something truly innovative to the table.

The upside of a social media bubble burst means that the door opens up for a new game changer in the digital realm. What do you think will be the next big thing?