Avoiding Business Bubbles About to Burst

Nothing lasts forever.  This couldn’t be truer when it comes to business booms.  As the dotcom bubble of the early 2000s demonstrated, what goes up tends to come back down at the same speed.  Any financial advisor or planner will tell you to never count on any “hot” business idea being hot for too much longer.  By the time you’ve heard about it, chances are the apex of opportunity has been reached and the players are already on the field.

In order to succeed, you’ve got to come up with the next big thing, not simply emulate a seemingly safe business strategy.  As far as which trendy businesses to avoid getting too mixed up in right now, the following four are probably set to burst in the coming years:

OUTSOURCE AGENCIES

Outsourcing American labor to cheaper employee pools overseas has been a successful business tactic for decades, and an industry of helping businesses accomplish this goal has been built around it.  But with the unemployment rate being where it is stateside, anti-outsourcing politicians are sounding increasingly convincing when it comes to dismantling the incentives of sending jobs overseas and boosting incentives to encourage businesses to hire Americans.  Once this occurs, the outsource agency bubble is sure to burst.

MICROBREWERIES

News of beer giants losing business to small scale “craft” breweries has a lot of aspiring brewmasters thinking they stand a chance in their local beer market.  While opportunity still exists, and the burst probably won’t happen for another year or so, it’s worth noting that virtually every American city has an established local craft beer.  More times than not these microbreweries have been around for decades and already control the majority of the ostensibly accessible craft beer market.  While there will always be room for another brand of beer on American shelves, the competition is tougher than it looks.

ONLINE MARKETING

From pay-per-click campaigns to web design to link building, someone eventually is going to realize that none of this stuff has any reliably consistent value to it.  While Google PageRanks will be boosted, the importance of this in an age when people will be using personal assistant technology to find online information is not exactly as evident as it once was.  While it’s probably not likely that online marketing will disappear, bet on seeing the overwhelming majority of internet marketing startups founded in the last year or so crash and burn in a year or so from now.

SOCIAL MEDIA

Once online marketing is reduced down to its barest necessities, the same is inevitable for social media.  Again we’re dealing with intangibles, the values of viral videos and other social media content are ultimately impossible to calculate with absolute certainty and are therefore extremely vulnerable to bursting.  Whether through investment or offering services specifically involving social media, stay frosty when it comes to the long-term strength of this industry.  Of all the bubbles to burst, this one will be the most sudden and the most volatile when it does.

Unless you feel confident that you can get in and out before the burst, hot topic business ideas are probably best to be avoided.  Bubbles are almost always inevitable, especially when it comes to tech-laden products and services.  Aspiring startups need to be thinking in the long-term, and following the prevailing business trends of today is not how you ensure success tomorrow.

What do you think some other businesses likely to burst in the upcoming year(s)?

Post by Amanda

10 Responses to Avoiding Business Bubbles About to Burst

  1. Viral video makers. ie Epic Meal Time and freddie w. There is a good circle of people currently making regular videos on youtube that are making tons of money and i think if it hasn’t burst yet it will very soon.

  2. A big bubble I feel will burst soon? All these Amazon affiliates making “review” style sites. They take up the whole first page of Google when you search for a product and people have been making a bloody fortune from referrals. Google is rapidly changing its algorithms to fight back, so I think this is a trend that may be breathing its dying breath in ’12.

  3. I am a high school student in Singapore and am currently enrolled in a personal finance class. We recently completed a project/case study on several historical bubbles. In the process, I did a present day connection regarding Apple. I found that despite Apple’s skyrocketing profits, there are many threats to its profit haven, especially within Asian markets where many firms have begun to make similar productions which imitate Apple products but have are thinner, have better cameras, and sometimes even USB ports.

    Would you agree that there is a chance that the Apple stock could develop into a bubble in around 5 years or so?

  4. Hopefully the small for-profit colleges (I see govt regulation putting an end to a lot of this in the next few years). As for breweries, I saw on Nightline last night that one American took his micro-brewery to Beijing because he said the U.S. market was too crowded. He seemed to be doing well over there.

  5. Good post! (Although…what? My microbreweries are gonna go away???)

    My financial adviser had us totally NOT invested in high-tech industries as the dot-com bubble was puffing up. When the dot-com industry crashed, my savings…uhm, were saved.

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