ANOTHER couple of days like this and the great tech bubble of 2012 might recede into history.
Several companies that were supposed to be the foundation of a new internet era plummeted last week. There were instant echoes of the crash of 2000, when the money stopped flowing, the dotcoms crumbled and Silicon Valley devolved into recriminations and lawsuits.
Shares of Facebook stumbled to a new low on Friday, closing just above $US23.70 after its first earnings report revealed a murky path to any profit that would justify its valuation. The heavily promoted $US100 billion company on the
eve of its May debut is now a $US65 billion company and falling.
Zynga, the games company that uses Facebook as a platform, was battered even harder on Thursday, leaving its value at less than a quarter of its peak.
Netflix, which is trying to move from physical discs to streaming video, and the group-buying company Groupon are at a fraction of their recent worth.
But feelings of disillusionment are far from universal. The New York Times reported that Apple, the most successful tech company, had been discussing an investment in Twitter. Social media is flourishing 1 billion Facebook and 500 million Twitter users would vouch for that. But turning groups of people into cash-generating customers on a hand-held device is clearly an immense task.
Nick Zaharias, who advises institutional investors, said his clients were "infinitely more sceptical. For future deals that are pitched as social deals, they're not going to pay up."
The issues facing each tumbling company are slightly different. But they all have the problem of selling something that is not quite real and perhaps less than essential.
"The gleam has come off the word 'social'," said Ben Schachter, an analyst with Macquarie Group. "The ground is now shifting underneath these companies' feet at a speed that we didn't see even in the late 1990s."
Groupon and Netflix have been in the investor doghouse for a while, while with Facebook there seems simple regret that its grandest ambitions might not be reached. "The jury is in: Facebook is not and will not be a second Google," the research group IDC said.
With Zynga there was a sudden sense that building a blue-chip business from virtual goods might be virtually impossible. It revealed in its earnings report that it might make less than half of what it had hoped to earn this year from players who paid actual money for virtual goods.
For all the pain, it is not yet like March 2000, when all tech stocks went into free fall. Google, Amazon and Apple are doing fine.