Is LinkedIn The Next Social Media Shoe To Drop?
Jesse Colombo | Nov 13, 2012 06:50AM ET
Since my last update on the social media bubble, this sector's situation has gone from bad to worse. This should not come as a surprise to my readers who have followed my social media bubble warnings since June 2011 on my Twitter blog and on my website.
Shares of social media gaming company Zynga (ZNGA), the creators of "Farmville" and "Mafia Wars", have plunged by an incredible 86% since their March 2012 peak of almost $16 per share and are now trading at $2.15 - penny stock territory. Zynga CEO Mark Pincus has had $1.24 billion shaved off of his $2 billion net worth that he had last year due to the decline in Zynga's share price.
Zynga's stock carnage was triggered by both the dramatic decline of other social media-related stocks as well very disappointing revenue growth. In response, Zynga laid off over 100 employees, closed their studios in the UK, Japan, Chicago, Boston and Austin, Texas, and 3 ). I cannot overemphasize the importance of hope and optimism in dire times such as these; the economy and financial markets are driven by human psychology, and having a reason for hope is what many people need to keep charging on (for example: "If Mark Zuckerberg can make it in these times, so can I!" or "At least some businesses are still booming!").
Disclosure: I don't personally hold any trading positions on any of these stocks discussed here, but placing bets against LinkedIn is one possible way to play the next phase of the social media bubble.
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