|By Peter Cohan|
|Wednesday, 22 August 2012 10:20|
scrambling for the exits on Facebook (FB) too. Since Twitter is not publicly traded, they can’t get out of that one as quickly.INVESTORS are giving up on Groupon (GRPN) and they’re
But social media attracts consumers because of dopamine — and like any drug — those consumers need a bigger dose to get the same effect. Social media’s inability to deliver that is at the root of what makes it hard for it to grow into its lofty valuations. Not only that, but it’s failing to come up with compelling ways to earn a return on spending to turn those consumers into repeat customers.
But Groupon’s biggest victims are the small businesses that get suckered in to accepting Groupons. Restaurants lose money on them because consumers flood the restaurants, order very low priced meals, strain waiters and cooks, get lousy service, and never return.
Why the recent social media fever that has contributed to excessive stock market valuations for Groupon and Facebook? They deliver dopamine — a brain chemical that makes people feel pleasure.
But they think Facebook could suffer from a reverse network effect if it starts to try to generate more revenues by advertising. They were not happy being fed advertisements based on Facebook making all their personal data available to companies.