No. 7 tech story of 2011: The social 'bubble'

A handful of social media companies went public in 2011, while the one that really matters didn't

This is the fifth post for "My personal, hand-selected top 11 tech stories of 2011." You can read the first four by clicking on the links at the bottom.


This year began with signs that investors -- both public and private -- were ready to abandon reason caution and embrace "social media," a generic term that came to represent anything from social networking start-ups to online daily-discount sites to streaming media providers.

Indeed, several high-profile social companies took advantage of intense investor interest to go public in 2011, while others flirted with IPOs as they continued to draw high demand in the private-share market and raise hundreds of millions of dollars. By May there was open talk of a growing valuation "bubble" enveloping social media companies.

But save for LinkedIn's ticker debut in May, none of the social media IPOs popped the way so many did back in the late '90s, when it wasn't unusual to see a new Internet stock triple its value on the first day of trading (as LinkedIn shares nearly did).

Nor did the social media IPOs come in great abundance, as Internet IPOs did during the bubble of the late '90s, when there were 289 Internet-related IPOs in 1999 alone. Here are the social media companies that went public this year:

LinkedIn (May)

Pandora Media (June)

Groupon (November)

Jive Software (December)

Zynga (December)

Throw in IPOs from Demand Media, Angie's List and a couple of others, and 2011 was hardly an Internet IPO gold rush.

Good thing, too, because shares of all social media companies that went public this year are down from first-day closing prices, with the exception of Jive Software, which has been trading for only 10 days.

For public investors, anyway, the excitement over social media companies certainly exists -- all of the companies listed above raised hundreds of millions of dollars with their IPOs. But there was little sign of irrational exuberance.

At least not in the public markets. The murky world of secondary markets for shares of private companies was a different story. There, shares of Facebook were so hot that the social networking giant's presumed valuation went from $35 billion at the beginning of the year to $100 billion by June. According to "people familiar with the matter."

Twitter also rode the private-share market to extraordinary valuations -- extraordinary, at least, for a company with no provable business plan.

Facebook is planning its highly anticipated IPO for next spring. The buildup in ensuing months could benefit consumer review site Yelp, which reportedly plans to go public in Q1 and could ride the Facebook wave.

Other potential IPO candidates to look for: Twitter and Tumblr.

But don't look for a social media bubble. There wasn't one this year, and there won't be in 2012.

Top 11 tech stories of 2011 linksNo. 11: Netflix's public suicide art project No. 10: The cloud rises No. 9: Tales of tablet triumph, tragedy No. 8: Patent wars
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