| 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. |
