Facebook, Twitter and Groupon: The Next Economy or the Next Tech Bubble?

The news of Groupon's $15 billion public offering inspired jubilation and hesitation in equal parts. Jubilation, because Groupon's IPO represents the emergence of social media as a mainstream, revenue-generating business. Hesitation, because just ten years ago, the tech world watched billions of dollars chase over-hyped and under-developed businesses, with the result being a catastrophic tech bubble that squashed the Nasdaq. How seriously should we take the rise of social media as a viable engine of the tech economy?

To get a better sense, I spoke with Beverly Macy, a technology writer and instructor whose recent book, The Power of Real-Time Social Media Marketing, teaches businesses how to harness the power of Facebook, Twitter and other social media. Here is an edited transcript of our conversation:

Talk a bit about the rise of Groupon.

There's nothing new about coupons. But something changed when Groupon and its rival Living Social hit this combination of getting a deal and being with people.The next thing we'll see is a business-to-business group coupon. I see small business companies getting into deal, like buying office supplies and renting equipment together. And we should watch for Facebook to go into coupons.

"Facebook [wants] to be PayPal, eBay, Amazon, Foursquare, Groupon, all in one place."

What's next in the social media world? What's the next big idea that will take that world by storm?

Mobile is absolutely the platform that everybody is looking at. So look for GPS combined with applications like Foursquare. In a few years, I'll be walking down a street looking into shops, and the deals will find my phone rather than me look for them. As I'm there in front of the Gap, the phone will say: "Here are the jeans you love, or that your friends love, and here's a deal if you buy now." Retailers will use all these converging technologies.

Some analysts think we're looking at a second tech bubble. Are they wrong?

I see some things that are promising and some things that are troubling.

The promising thing is that companies like Groupon, Facebook, and Zynga are already making money, whereas early dot-coms were just a promise to make money. Still we really need to be careful that these companies aren't fads. That's why engagement is so important. Facebook and Groupon are good at holding on to their huge audiences.

What's not promising is we're coming out of a recession, and people are looking for the next big thing. There is lots of money -- both smart and dumb -- on the sidelines.

What sector are you nervous about? Where is the dumb money going?

I'm skeptical about standalone products. Money is going to three big sectors. Money is going to geolocation, money is going to [online] games, and money is going into the group coupon world. As a standalone, these sectors are risky. But if these capabilities converge, [e.g. a group coupon technology that uses geolocation to offer deals] they'll be more sustainable.

Last question. Every industry has a competitor. Groupon has Living Social. Foursquare has Gowalla. What's Facebook's competition?

Facebook is really proving to be an enigma. The way I see it, pretty soon you're not going to go to the Best Buy website. You'll go to Facebook, where you can talk to friends, use geo-location, play games, and get coupons. A website will be a brochure for an organization.

Facebook is looking to be the place for the entire world to transact. That is a big big vision. I think that's what we're seeing. They want to be PayPal, eBay, Amazon, Foursquare, Groupon, all in one place.

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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