Social media companies have to do a lot of decision making under uncertainty, a whole lot of uncertainty, because every risk assessment focuses on a brand-new kind of product with no history in its marketplace. They have to bet fearlessly on a whole lot of unknown taking place on the immaterial Internet. But as one who has enjoyed a brief two years experience working in the blogosphere, I’ll bet that, as ephemeral as that realm may seem, there likely is some there there, some value when we figure out how to calculate it.
Gertrude Stein once famously criticized Oakland, California because "there is no there there." I think of this often as I watch a fascinating and rapidly rising business trend, the conglomeration of social media enterprises via acquisitions and mergers. This week the European company Wikio, a specialist in the "blogosphere and social media," acquired the French company Neotia, which purveys a "buzz monitoring and online reputation management platform."
Wikio, which purportedly indexes a million websites, wanted to buy Neotia because that company is good at analyzing the influence of brands and buzz campaigns and because of its CEO’s expertise in decision analysis. Neotia wanted to be bought because Wikio will provide potential clients a means of accessing Neotia.
What is remarkable to me is that here is an industry in which the functions of the products are so new that their originators also have to originate names for what they do–buzz monitoring, measurement of online influence, and so forth–and yet with only a couple of years experience in most cases, these companies are buying and selling each other. How do they create product strategies for these products? How do they calculate prices? And then, when they want to swallow up a competitor, how do they calculate an offering share price and figure out their value-at-risk? And how do they project how long any of these values will hold?