The big story in social media over the course of the last week has unarguably been Facebook’s wobbly stock market launch. Frankly, it doesn’t surprise me that things have gone awry, but I’d be lying if I said I had expected things to go wrong as quickly as they did. The initial stock offering (IPO) was made on Friday, but stocks came online for purchase a full half-hour after their scheduled time. Buyers came away not knowing how many stocks, if any, they had purchased. Apparently, an underwriter overvalued the stock, and Facebook may have been in on the error. Predictably, the lawsuits are already flying. And through it all, Facebook stocks have been dropping in value, finally rising again only today, and finishing 15% down from their closing price last Friday.

That may very well be the end of the downward trend for now. I’m the first to point out that the exigencies of Wall Street lie beyond my competency. My pessimism with regard to Facebook going public has less to do with stock market savvy than it does with a certain wariness when it comes to internet speculation. As I argued in “The Revolution Will Be Monetized,” the promises that drive the enthusiasm of early internet adopters are, more often than not, castles in the sky.

Lately, I’ve begun to think that’s no coincidence – that there may be a structural cause behind the way the internet moves from bubble to bubble, finally trading its high-flown ideals for new ways of doing the same old business. If you’re a regular reader of this blog, you may find it staggeringly unsurprising that I’d arrive at the conclusion that it’s structural. But there it is.

Simply put, the internet is a universal Turing machine for hype. It didn’t start that way, but as interest in the technology itself accelerated, more and more of the innovations that expanded (or perhaps defined) its potential concentrated on its capacity for building hype. It’s quite probable that no set of innovations have lent themselves quite as readily to that function as the technologies and sites bundled under the catch-all of “social media.”

While consumers are apt to think it the function of social media to facilitate socialization, its function in the eyes of most of the people who operate and finance social media is to “aggregate attention.” That’s especially the case when (inevitably) those vendors start looking for ways to pay their bills. Most recently, that point was reiterated to me when I attended a conference on digital media. The implicit theme of nearly every talk given was that the utility of digital media hinges on its capacity to turn social media users into brand advocates. In short, you’re the product.

Getting back to Facebook, then, it’s worth asking how they’ve been paying their bills. Advertising is part of the equation, but not enough to justify the immense amount of money that’s been poured into the start up since it launched 8 years ago. GM’s recent decision to pull its Facebook advertising underscores that point. It’s probably more apt to say that what’s kept Facebook afloat is the continual willingness of investors to pour in more cash on little more than the expectation that Facebook will one day make significant returns on those investments.

That is to say, Facebook has thus far thrived on the hype surrounding its capacity to generate more hype. It has, in fact, been extraordinarily successful in maintaining those expectations, having continually drawn investors for 8 years without yet having made good on its billion dollar promise. Zuckerberg and company certainly deserve blame if it turns out they did pressure underwriters, but the overvaluation of the stock began long before that, and it’s due in no small part to the bubble-shaped structure of life on the internet.

But – friends, Romans, countrymen – this isn’t “I told you so,” pure and simple. I bring all of this up because, in the long term, it’s also possible to distinguish between the bubble that’s forming around social media, and the very real promise of the medium. Facebook is heavily invested in the game of trying to maintain high investor expectations until it can find a way to justify them with profits – and, obviously, the longer it plays that game, the less likely it is to ever find adequate recompense. But it’s played that game by attracting users. Those users have come because there’s actual value in the services that Facebook provides. Moreover, there is largely untapped potential in the civic and sociological applications of social media outlets like Facebook.

In the long run, those interests will be better served by social media that’s tied to a less speculative financial model than Facebook’s. Whether or not anyone will be willing to pay for Facebook remains an open question, but it’s almost a foregone conclusion that there will eventually be a social media platform that runs on paid subscriptions. People simply value the sorts of interactions afforded by social media too much to part with them should the promises of brand advocacy prove reluctant to materialize.

The question going forward, then, is: How do we turn the innovations of social media away from mere hype and into real utility. The answer will almost certainly attract less attention than the darlings of the contemporary social media wave, but then, that’s precisely the point, isn’t it?

is the founder and editor-in-chief of Culture Ramp.
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