This week is the annual SXSW Interactive conference, where social media elite descend on Austin to party on Sixth Street, post selfies with people who have higher Klout scores and pick up the mad schwag liberally distributed by startups. A few may even wander into conference halls to see some presentations, although that is far from certain.

This will be my third year staying home, and while I will miss the chats and parties, I will not miss the general sense that SXSW is a missed opportunity for the social media industry. All the best and most experienced minds in the business gather in one spot, but few find themselves in sane, sober and expansive conversations because it is hard to focus on serious topics when one is screaming over an indie band or dashing from the Convention Center to South Commerce to West 6th for events.

Although SXSW Interactive has tended to feature more hype than criticism, perhaps 2015 will be the year when reality sets in. At last fall's Social Shake-Up, I was pleasantly surprised at the candor at which people were discussing declining reach, difficult social metrics and social media marketing obstacles. It will be interesting to see whether the predominant buzz from this year's SXSW is about social media marketing difficulties or the more typical chatter about the next hot new app.

If SXSW Interactive gets serious about substance over hype, here are seven recent studies that should be mentioned from stages in Austin. All challenge assumptions about the value of social media marketing and offer the sorts of data that should guide tough decisions about investments and strategies in the social channel this year:

• Bounce Exchange find poor organic social acquisition and conversion:  In 2014, Bounce Exchange analyzed more than $1 billion of e-commerce revenue. Their research found that organic traffic from these companies’ social media channels accounted for only 1.2% of clients’ overall revenue. Moreover, conversion was 1.3%, less than half of their clients’ overall average. (Source)
    

Source: The Center for Marketing Research at the University of Massachusetts Dartmouth

• The Center for Marketing Research at the University of Massachusetts Dartmouth finds fewer companies optimistic about tracking sales through social media: In interviews with executives at Inc. 500 firms, the UMASS study found a drop in companies tracking sales through social media, from 36% in 2013 to 32% in 2014. Even more telling, at a time when marketers are spending more on social media and should be improving their metrics, the number of executives who do not know if social is driving sales increased seven points, from 11% to 18% (and another 44% believe it accounts for less than one percent of sales).
  
  Finally, the UMASS study found that Inc. 500 executives are losing faith that social has the potential to increase sales in the next year--the percentage of executives who indicate social is the tactic with the most potential to drive sales dropped from 16% in 2013 to 13% in 2014. That puts social media well below online advertising, less than business directory listings and equal to traditional print/broadcast media. (Source)
    

• Source: Custora E-Commerce Pulse

  Custora finds social drives small fraction of sales compared to organic search, PPC and email: Custora tracked 100 million anonymized shoppers, $40B in e-commerce revenue, and 100+ online retailers in January 2015. It found that social media delivers just 2% of ecommerce sales. This figure is 91% less than organic search, 88% less than CPC and 87% less than email. Custora's data was no different over the holiday period. In its E-Commerce Pulse 2014 Recap, the company notes, "Similar to the trends last holiday season, and throughout 2014, social media (including Facebook, Twitter, Instagram, and Pinterest) is still not driving a substantial share of e-commerce transactions. Through the holiday season (November - December 2014), social media drove only 1.9% of all e-commerce orders - a similar share to holiday 2013, when it drove 2.3%." (Source and source)
   
• Webmarketing123 finds that, when it comes to social media investment decisions, marketers are using assumptions rather than hard metrics:  A November 2014 study by Webmarketing123 found that that "many marketers still relied on 'gut instinct' when determining which channels to use for marketing campaigns, as the most-used weren’t always the most-measured." The report called social media "one of the biggest pain points for respondents." While 87% of B2B marketers used social media, just 17% were able to prove its ROI—that is the lowest percentage among channels used. As for B2C marketers, social is now the most commonly used channel, with 87% of B2Cs using social, but only 27% could calculate ROI. (Source)
    
• MaritzCX finds that social media is not an influential information source for car buyers: MartizCX surveyed 60,000 people and found that social networks (Facebook, Google+ and Linked) were the 19th most influential information source when customers under the age of 35 research a new vehicle. While "Family/friend/word of mouth" ranked second at 18.8%, online social channels were much less significant, with "Chat rooms/blogs/forums" at 1.5%, online videos at 1.3%, social networks at 0.4% and Twitter (dead last) at 0.2%. Beating digital social channels at influencing car purchases are very traditional channels such as salespeople at dealerships (the top influencer at 21.5%), newspaper/magazine reviews (4.7%), TV ads (3.6%) and manufacturer's brochures (2.8%). (Source)
    

• Source: CMO Survey

  The CMO Survey finds that marketers continue to use the least powerful social media metrics: It is amazing that the two most common social media metrics used by marketers this far into the social era are still Hits/Visits/Page Views and Number of Followers or Friends. We are well past thinking that top-of-the funnel metrics are a good way to measure any digital marketing tactic, much less social media. Less than a third of marketers evaluate social media based on conversion rates, and fewer than one in seven use customer acquisition cost.
  
  Even more concerning, there has been a decrease since 2010 in the number of marketers using bottom-of-funnel social media metrics such as Sales Levels, Revenue per Customer and Profits per Customer. Marketers are ignoring the most powerful metrics in order to focus on the ones that are easiest to collect (and to manipulate). (Source)
    

• Source: Marin Software

  Marin Software finds social advertising significantly lags search and display: The Marin Software Performance Marketer's Benchmark Report is expansive, covering over $6 billion worth of ad spend from advertisers and agencies with budgets in excess of $1 million annually on paid-search, display, social, and mobile. First the good news for social media: The clickthrough rate for social ads is better than for display ads--social CTR was double that of banners on desktop and 50% greater on smartphones. However, while social ad clickthrough may beat display, it still pales in comparison to search, which has a 425% better CTR on desktop and 383% greater on smartphones.
  
  Once the folks who click on those ads arrive on your site, social conversion rates are downright dismal. Compared to social ads, display advertising's conversion rates are 255% greater on mobile and 900% more on smartphones. Social advertising conversions fare even worse against search ads; search ads deliver conversion rates 818% higher on desktops and 2100% greater on smartphones versus social ads.
  
  While social advertising offers the lowest cost per click (CPC), advertisers (at least those whose goal is conversion) are over-paying for social ads. Desktop social ads offer a CPC 82% less than desktop search ads but return a conversion rate 89% less than desktop search, making social advertising's cost per conversion around 65% greater on desktop. On mobile, social advertising has a cost per click that is 80% less than search ads but experience conversion rates 95% less than search, resulting in a cost per conversion that is more than four times greater in social than search. (source)

Today, I gave a keynote address at the PR + Social Media Summit in my hometown of Milwaukee. My presentation was entitled "Stop Social Media Marketing (Unless)," and I have embedded the deck at the end of this blog post.

I predict that many CMOs will diminish their support for social media, content and earned media marketing in the next year or two, and when they do, careers will be adversely impacted. If your career relies on Marketing Department support for content or social media marketing, now is the time to take stock of the trends and consider some actions to protect your career. It is possible that you work for the right sort of company for which social media is well aligned for Marketing Department expectations---that's the "Unless" part of the title--but, as you will see, I believe this is the exception and not the rule.

What is (and is not) Social Media Marketing?

Before we explore where social media marketing works and where it does not, let's first be clear that the definition of "social media marketing" does not include paid media on social networks. Go ahead and invest in advertising on Facebook and Twitter, just do not call it "social." The most popular forms of advertising on Facebook today are retargeting and custom audiences, neither of which are remotely social, and less than one in six ad dollars use social data.

I suggest a better definition of Social Media Marketing is this: Content authored or encouraged by the brand and shared by Word of Mouth that creates earned media and delivers on Marketing objectives. This definition excludes a couple of things, such as advertising (which is not social) and consumer content not coaxed by a marketing program (which is not marketing). It also excludes social media programs that fail to deliver on key marketing metrics, and therein is the problem for most brands.

The Earned Media Venn Diagram

A simple Venn diagram explains what works and what does not in Social Media Marketing. The first circle includes what your brand can say to move consumers closer. This does not mean retweets and likes--the fool's gold of social media marketing--but rather changes in consumer attitude or behavior such as greater awareness, consideration and purchase intent.

The second circle in the Venn diagram is what consumers want to hear from your brand. For years, we have acted as if consumers crave branded content, but the data on this clear; a 2014 Kentico study found that 68% of US consumers “mostly” or “always” ignore brand posts on every social network. The situation is much worse for some categories than others--a 2014 Scratch/Viacom study found that 71% of Millennials would rather go to the dentist than listen to what their banks are saying! If people would rather get a cavity filled than listen to your brand, it's a good bet your content and social media marketing faces a profound uphill challenge.

Where Social Media Marketing Works

Some brands have an overlap between these two circles of the Earned Media Venn Diagram; most do not. There are three types of companies that have this "magic intersection" between content that helps the brand and that consumers want:

• Brands in select verticals:  Some categories have built-in consumer interest. For example, sports brands can easily post content that drives engagement and also increases demand for team attire and products. TV shows and movies have an easy time offering content fans will share that also increases ratings and box office receipts. Style brands are another example--in the same way that women eagerly purchase the September issue of Vogue with its 631(!) pages of ads, so too will style-conscious women pay attention to and share the latest pins and posts from their favorite fashion brands. Brands in select verticals enjoy a magic intersection between the content consumers want and the content that drives consideration and sales.
    
• Brands with purpose:  Consumers may have little interest in what banks have to say, but that does not stop USAA from delivering great engagement and inbound traffic with its posts. This is because USAA has created a brand with a purpose that resonates with its audience. Another example is Chipotle, which has outperformed other brands in the restaurant industry by promoting its commitment to more locally- and organically-sourced ingredients. (Just last quarter, Chipotle delivered a same-store sales increase of 17% in a vertical where almost no brands are able to achieve half that.)
    
• Brands with better products and services:  Of course, there is always the old-fashioned way of encouraging attention from consumers: Be better than the competition! Apple has no official company profile on either Facebook or Twitter, yet it still beats Samsung when it comes to building buzz. Both companies had product unveilings in early September (Samsung for the new Note and Apple for the iPhone 6), yet despite the fact Samsung has 2,350% more fans, followers and subscribers on Facebook, Twitter and YouTube, Apple still delivered far more Word of Mouth about their event and product. Apple does not need social profiles and content to drive WOM; it just needs to continue producing interesting, innovative products that get fans talking.
    

When brands have nothing to say: Example of a brand exploiting a personal tragedy to build its own brand engagement.

Social Media Marketing's Inability to Deliver Trust, Acquisition or Purchase Conversions

Social Media Marketing on a Collision Course with C-Suite Expectations

How to Protect Your Social Media Marketing Career

Credit: slgckgc via photopin cc

I love internet memes, but I hate the way each one gets turned into fodder for advertising publications and agency bloggers to (try to) turn the event into a "teachable moment" for marketers. While a trend is hot, news sites and agencies strive to build more attention and traffic with a form of newsjacking, leveraging interest in a trending topic to create attention for themselves. Right now, this is happening with the Ice Bucket Challenge, with dozens of news, blog and LinkedIn posts telling marketers what they can learn from this meme. I do not agree with much of what has been written, so at risk of engaging in newsjacking myself, I am going to write about this program and hope that it encourages more dialog and consideration about this craze and what it may or may not mean for marketers.

Sometimes, a meme can furnish a few lessons that marketers might consider when developing their marketing strategies. At other times, the connection between the event and brands is tenuous, at best. And on occasion, the effort to turn current events into something relevant for brands and marketers blows back.

Many recently criticized PR agency Edelman for publishing a blog post immediately after Robin Williams' suicide suggesting brands "Seize the day" and use the tragedy "as an opportunity to engage in a national conversation." While the Edelman blog post was worthy of criticism, it was really just a symptom of a larger issue: Marketers' and agencies' continued promotion and use of dubious tactics such as "real-time marketing" and "brand newsrooms." These schemes attempt to hijack consumer emotion and interest in a current event to make otherwise irrelevant brands more relevant.

Business leaders must recognize that companies build relevance not by hopping from one trending topic to another but with concerted and ongoing effort in specific and discrete issues that resonate with consumers. Edelman should know--better than most--that the time for a company to demonstrate care for depression and suicide is before a celebrity death brings these topics to the forefront and not after Twitter is abuzz. One way tells consumers that your organization stands for something more than profits; the other tells consumers your brand is a vulture willing to exploit any tragedy or event to try to boost the bottom line.

It is happening again--while the world is busy dumping buckets of ice water over their heads, ad industry news sites and agency blogs are lighting up with posts about what marketers can learn from the #IceBucketChallenge. Alas, I believe many of these posts and articles are simply wrong, drawing arguable connections between what worked for this charitable effort and what will work for brands. Here is what I believe marketers can (and cannot) take from the success of the Ice Bucket Challenge:

• The #IceBucketChallenge demonstrates the power of social media, not the power of social media marketing. (Tweet This): Almost every article and blog post I have read calls this a "campaign." It is not. A campaign is a planned series of marketing events launched by an organization to achieve a goal, but the ALS Association did not plan, launch or manage this (although they have eagerly jumped on the bandwagon). The Ice Bucket Challenge was a spontaneous and viral happening created and spread by individuals; in fact, had the ALS Association attempted to launch this themselves, they likely would have been criticized for manipulating and asking too much of people. The Ice Bucket Challenge succeeded not because it was a carefully crafted campaign but because it wasn't.
   
• The Ice Bucket Challenge didn't succeed because it is easy but because it is difficult. I have read several times that brands can learn from this program that making participation easy for consumers is vital. Excuse me--the Ice Bucket Challenge was easy?! Most brands would do backflips simply to get 15 seconds of consumers' time to post a rating or positive comment. Meanwhile, the Ice Bucket Challenge required people to find a bucket, fill it, lug the heavy bucket somewhere convenient, fill it with ice, set up a smartphone to capture everything, lift the heavy bucket, douse themselves in ice-cold water, dry off, change clothes and post the video online. And, oh yeah, donate money! If that is your idea of easy, I wonder what a difficult activity might be!
  
  Ironically, had the challenge been something easy--"I dare you to post a video doing a duck face!," for example--it would not have worked. Because the Ice Bucket Challenge was difficult, it gave people an opportunity to demonstrate their willingness to make the effort--and no, your brand probably cannot get people to do heroic activities in support of your product or service. 
    

• Credit: gwen via photopin cc

  The Ice Bucket Challenge was not a program about caring but about pride and shame. Before you react negatively to me calling out ego and humiliation as drivers, let me point out that this is not a criticism. The program succeeded, and there is nothing wrong with a charity with using the human emotions of pride and shame to achieve a positive end; after all, those are exactly the same mechanics that work in many charitable programs. Take, for example, the VFW fundraising program where volunteers stand with cash buckets in front of store entryways and give away little flowers to those who donate. If you cough up cash, you get a Buddy Poppy to wear around that day, showing pride in your small sacrifice; but if you make eye contact and walk past without donating, you feel shame. (You know you do!)
  
  The fact that people could show off how creative they were (with Bill Gates building a dousing contraption and Stephanie Izard doing an ice bucket Flashdance) was a big part of the success of the Ice Bucket Challenge. So was the part of the program that demanded people call others out by name; this was the charitable equivalent of a chain email, but because of the social media elements, people could not break the chain privately and quietly but only by humiliating themselves with silence and inaction. While some have claimed this program was about pulling at the heartstrings, I can recall seeing just one video that was legitimately emotional. The lesson of the Ice Bucket Challenge is that pride and shame are powerful human emotions, but brands should be very wary of trying to activate these emotions as part of a for-profit marketing campaign. 
   

• Lou Gehrig's farewell speech, when he declares himself the "luckiest man on the face of the earth," moves me to tears.

  The Ice Bucket Challenge was not successful as a cohesive marketing effort, but it was a great first step. As I write this, the ALS Association has received $41 million of donations thanks to the Ice Bucket Challenge, more than double what the organization raised in its last fiscal year. But while this clearly had a terrific fundraising impact in 2014, will it build future success for the ALS Association?  For example, I would suggest the Ice Bucket Challenge did little to raise awareness. Most people had heard of Lou Gehrig's Disease before the Ice Bucket Challenge, and afterwards, how many of the participants would be able to identify its symptoms, when it strikes, its prevalence or anything else about ALS? Very few of the Ice Bucket videos made even passing reference to ALS, and without awareness and knowledge, this one-time event cannot be turned into a lasting driver of success in the fight against ALS.
  
  Of course, the ALS Association now has the names and contact data for more than 700,000 new donors. If the charity fails to educate those individuals, few will donate again and the association will not build upon this success for future fundraising benefit. With additional concerted effort, the ALS Association may convert this successful acquisition program into an effective awareness, loyalty and repeat donation effort. The point that marketers should take from this is that no single campaign or program can be a soup-to-nuts success delivering on every marketing goal; instead, building deep, strong, and long-lasting consumer relationships takes a cohesive brand journey. 

I do not have a crystal ball, but I know the difference between irrational exuberance and levelheaded, sound business analysis. In the wake of the news of Facebook's acquisition of WhatsApp, I have seen a lot of the former and very little of the latter. The flood of articles and blog posts containing weak arguments and wishful thinking has, once again, confirmed my fears that a social and tech bubble continues to grow and prop up social media stock prices and valuations. My concern runs deeper than just stock prices, however; I am deeply concerned about what this all means to the social media industry and those who work within it.

Some folks seem to think the bubble has burst and we have already recovered; in the three months after Facebook's IPO, the stock lost half of its value, but in the roughly 18 months since, Facebook's stock has risen 280%. While some see the rise as evidence the bubble burst and recovered, I look at Facebook's Price Earnings (P/E) Ratio of 100+ and wonder when the piper will show up for his payment. By comparison, Google, Apple and Yahoo have P/Es of 33 or less.

The only real comparison to Facebook's generous P/E is Amazon, which has a P/E ratio north of 500, but in this case investors are paying for a company that has strong growth, multiple revenue streams, a significant share of the cloud computing market, 20 million paying Amazon Prime members and more than 15% of total US ecommerce sales. More to the point, investors continue to buy Amazon at a premium because it will own a significant share of the $5 trillion US retail sector long after the JCPenney and Sears in your neighborhood have been converted into condos or indoor mini-golf courses.

My point is not to convince you that Facebook is in for rough times since 1) I am not a financial advisor, and 2) unfounded optimism may continue to trump financial fundamentals for some time (although it never lasts forever). Instead, I want to encourage a reasonable examination of the WhatsApp acquisition and explore what it means to Facebook and the social media industry.

Remember when charts just like this were being used to justify claims Google+ was going to swamp Facebook? How'd that work out again?

Here is what Facebook purchased for $18 billion: 450 million users (which is honestly quite impressive) and an estimated $20 million of revenue.  Wait, hold up there a moment--only $20 million? This is a company that supposedly charges users a 99-cent annual fee after the first year and, according to that widely circulated "hockey stick" chart, had 200 million users one year ago. Why is the revenue of this company not ten times higher? Either WhatsApp has a business model that charges people 99 cents a year starting in their second year or WhatsApp had 200 million users a year ago--both cannot be true. 

So, what else could Facebook have bought for $18 billion? (A lot of articles claim Facebook could have bought the entire global music industry, but this is weak logic from writers who cited not the value of the music industry but the annual sales of records and songs.) For the same amount Facebook paid for WhatsApp, it could have acquired 50% of Yahoo, giving the social network a half stake in Yahoo's billion-dollar annual income and 800 million active users. Or better yet, Facebook could have acquired several sharing economy startups, such as TaskRabbit or Airbnb, allowing Facebook to introduce peer-to-peer business into its network and giving the social network a new revenue stream tied to its core business.

I have a hard time seeing what the $18 billion WhatsApp acquisition has bought Facebook. Even if WhatsApp monetizes every one of its 450 million users at its current annual subscription fee, the company will earn revenue of $446 million; of course, its net income would be much less than this after paying for people and infrastructure expenses. If WhatsApp earns a net margin of 25% (which is greater than Google's, Apple's or eBay's), it would clear $112 million of net income, leaving Facebook with a 160-year break-even time frame.

Even if WhatsApp triples in size and becomes larger than Facebook itself is today (and that is a big "if"), it is likely to contribute less than $350 million to Facebook's bottom line. That means even with remarkable record-setting growth, Facebook will still not break even on its WhatsApp investment until 2065, barring a considerable change in the messaging app's business model. (I do not think many of us would take a bet that Facebook will still be around in 2065, would we?)

Note written by WhatsApp founder Brian Acton.

Of course, WhatsApp could try to collect more than 99 cents a year from each user, but considering the service has yet to charge anything to even 5% of its customers, it is fair to ask how much more the service can ask before users flee to one of the other free options. Or WhatsApp could start serving ads, but there is no telling how much ad revenue the service could generate or how many users, who were very clearly promised no advertising, would abandon.

A lot of articles and blog posts have been written about why the WhatsApp acquisition was a good move for Facebook; in fact, too many were written on this topic, which seems very telling. The more people feel a need to defend something, the more it is reasonable for us to question it. A lot of tech, VC and social media professionals with an interest in keeping the social bubble bandwagon rolling have been awfully quick to offer justifications as to why this deal was not another sign of a growing social media and tech bubble.  Their arguments include:

• "Facebook is buying new users!"  Many suggest that Facebook is getting value by acquiring customers who do not already use the social network, including younger and overseas users. This may be true, but in the long term, companies are not rewarded for having customers but for earning revenue and profit from them. Unless Facebook can find a way to convert these new users into a stream of revenue and income to match the enormous investment (and we just explored its challenge in doing so), then paying this much for those new users makes little sense. Besides, with Viber, WeChat, Snapchat, iLine, BBM and others accumulating their own sizable user bases, there is no evidence that Facebook may not have to chase these same users to other platforms in the future.
   
• "There's value in the data!"  Others argue there is value in Facebook collecting data about WhatsApp users. First off, it remains to be seen if WhatsApp users will allow Facebook to harvest data from their personal communications; in Germany, WhatsApp users are already fleeing following the Facebook announcement after a German data protection commissioner urged citizens to seek more secure messaging options. Secondly, we have to ask how Facebook will use this data to drive revenue. For that portion of  the WhatsApp user base that currently uses Facebook, the social network already possesses huge amounts of data and is not likely to secure any additional and meaningful insights. As for those WhatsApp users who are not on Facebook, how can the social network convert this data into revenue if WhatsApp does not serve ads? Where is the potential to monetize this data sufficient to justify an $18 billion investment?
    
• "Facebook will own the address book." Analysis by The Register claims Facebook paid so much for WhatsApp in order to get access to our "phone book." I'm not sure I understand of what value it is to access consumers' digital phone books. How did Outlook generate revenue for Microsoft by being the application people used to store their contact list? How have Google and Apple profited by furnishing Gmail Contacts or the iPhone address book? "Owning" the address book has not historically been a means to generate revenue, and this is not likely to change in the future.
    
• "Google wanted it."  Just seven months ago, WhatsApp was valued at a mere $1.5 billion. What suddenly made the company worth 1200% more? Google wanted it, and many argue that the price Facebook paid was worthwhile in order to prevent Google from snatching WhatsApp. Overpaying for an asset just because a competitor wants it may work in an art auction, but it is hardly an appropriate business justification for a multi-billion-dollar business deal. The fact Google was willing to pay so much does not mean WhatsApp was necessarily worth it; although Google has made a lot of smart acquisitions (such as YouTube), the company has a far from perfect record. In 2006, Google paid $102 million for radio ad platform dMarc but shuttered it 2009 after it failed to take flight. And Google purchase Motorola Mobility for $12.5 billion only to unload it two years later for less than $3 billion.
    
• "It's a strike against the telcos." No doubt about it, mobile service providers (particularly overseas) are seeing a decrease in text messaging fees as a result of free and low-cost messaging apps such as WhatsApp. Of course, users of Facebook and WhatsApp still need to rely on the telcos to furnish the data services those apps require, so while WhatsApp may force telcos to shift fee structures, it hardly threatens the relationship between the mobile companies and their subscribers. Moreover, Facebook and WhatsApp do not win by interrupting the revenue stream of telcos but by replacing it, and given WhatsApp's buck-a-year model, there is little indication they can do so.
    
• "Facebook is buying the competition." Some bloggers and armchair analysts argue that buying the competition is a great idea. Sometimes it is, but most acquisitions fail. (Estimates for what percentage of M&As fail run from 50% to as high as 90%.) Merely eliminating the competition is not enough--the acquisition still has to furnish value appropriate to the cost. Facebook cannot afford to continue chasing every messaging application that arises. First it was Instagram, then it failed to capture SnapChat, and now it's snagged WhatsApp, but with each acquisition, the costs rise--Facebook got Instagram for $28 per user, but less than two years later, the price for WhatsApp was 50% greater per user. With other messaging platforms growing and given the way users adopt and abandon communication platforms, Facebook cannot keep chasing users; at some point, Facebook has to build a better mousetrap rather than overpaying to acquire the mice.
    
• "It's just funny money." Or, "It's about users and network effect, not money." With every discussion I have had about this acquisition, the dialog tends to devolve to this: The supporters accuse those asking how Facebook will earn a return of being small minded and failing to understand the new economics at work. If you want evidence of the existence of a bubble, look for people claiming that profits and returns do not matter and that billions of dollars of cash and stock of publicly traded companies is "funny money." There is no better sign that an industry has lost its business sense than this. For a while, investors may reward innovative companies for something other than income such as growth and potential, but eventually it becomes about profit and value. It always becomes about profit and value in the end. Today, I'm hearing the same arguments about social acquisitions and valuations that I heard during the dot-com bubble. I have seen this movie before and I know how it ends.