Three years ago, there was a lot of excitement in the air around here. The Social economy was booming and the untapped potential of the mobile market seemed like another gold mine that was ripe for harvesting. And yet, for all of the potential, for all of the dreams, we now find ourselves in a bit of a malaise.
Over the past year, we've seen the Facebook IPO and a number of exits and pivots by long-running start-ups. Many of the businesses that were so full of promise have struggled to deliver consistent earnings. What was once a thriving Web 2.0 ecosystem of interconnected APIs has deteriorated into a series of platform wars as many of those same businesses have built walls and and grasped for monetization. If all of this were an action movie, this might be that moment in the movie when everything looks darkest, the moment before the hero manages to perform that amazing feat that turns everything around.
History may look back and mark Steve Jobs' passing as the end of that golden era of innovation, but I think that the real defining moment was the Facebook IPO. While some may attribute some of the current malaise to the Nasdaq, computerized trading, or the other problems in the Facebook IPO, the underlying driver goes beyond that. Sure, if the Facebook IPO had been a glorious event and our friends were all telling stories of the epic fortunes that they made on Facebook stock, some percentage of the industry might feel better. But, realistically, the issue runs deeper than that.
Prior to their IPO, Facebook was a massive reservoir of potential energy. It had tremendous wealth was stored in the possibilities. It was the platform for the future, the platform for everything. It was a changing how software worked. It was the next Google, and everyone tied to it was going to make a fortune. It was like a newly discovered treasure map or Al Capone's unopened safe, the perfect candidate for drawing people in to place bets.
These aren't just bets on Facebook, their bets on a platform and the entire emerging market. They are bets on the ecosystem that is linked to Facebook, bets on businesses and technology that use 'social' to sell their ideas, or anyone riding the wave of Facebook hype to sell a dream of an untapped future.
This is technology at the speed of hype. It's selling the idea that, in the same way that Facebook has built a market around sharing personal information with your friends, that market remains undefined when it comes to sharing information with your coworkers about the office supplies that you use -- and that exploiting that segment is inevitable.
Facebook's IPO shifted all of that potential energy into an unmetered system to one with a real ruler. Not only was it an opportunity for all of those speculators to pull out of their bets on who would win that initial spot in Facebook's market, it was an actual measurement on what the market thought that it was all worth. Fifty billion dollars? Perhaps not. Even if the actual value of Facebook was substantial, with the IPO, the size of the hype balloon that carried the dreams of all of those others shrank.
Looking back, it's easy to see aspects of the market that were oversold and dreams that were built on a foundation of hype. But remember, it isn't just social. When we saw the green technology boom, the valley was swimming in solar equipment companies. Same with mobile apps. Or telecom and broadband technology companies back in the days when we were building out the Internet infrastructure. This is normal market behavior surrounding technology at the speed of hype.