Is there a Tech Bubble for social media?

Mashable recently released an interesting infographic from social media site G+ about the valuations of social media sites. They asked whether basing the value of a social media brand on its users and not its revenue is really a good idea.

While Facebook clearly earns a large profit from its advertising options, Twitter still appears to be struggling with its sponsored tweets concept. If a company is not achieving a high turnover, how can such high valuations be justified?

The piece appears to compare the current tech bubble to the bubble of 1999. But as one of the readers ‘jbernard703’, who commented on the piece, pointed out, “There is no bubble because no “real” money has been dumped into these companies as of yet”.

The closest example of the social media bubble bursting was seen when Yahoo decided to retire social bookmarking site Delicious, due to the lack of profit model. However, the service was later bought by YouTube founders Chad Hurley and Steve Chen, and it’s currently valued at $15-30 million.

So, have we learnt from the bubble? Or is the situation likely to occur again?

Source: Mashable