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Social Media Surge: Is It A Bubble?

Neuman, Nick
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2013
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2013-05-03
Abstract
Market "bubbles," or periods of irrational investing and excitement for a particular type of investment, have been a recurring phenomenon in markets since the 1600's. These bubbles result in a large buildup of wealth followed by a crash and extremely quick loss of that wealth. Through analysis of fundamental flaws in the business models and decisions of investors in three social media companies -- Facebook, Groupon, and Zynga -- this paper argues that there is a new bubble in social media stocks, and that it has similar drivers to those of the Dot-Com bubble in the late 1990's and early 2000's. These drivers are increased venture capital investing, relatively unknown and misunderstood business models, and the general irrational excitement surrounding the companies.
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Finance
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