Lots of people are following Twitter’s IPO and wondering whether or not we’re dealing with the second Internet bubble. My answer is a clear “NO”, for the simple reason that we can no longer simply refer to “the Internet” in a way which encompasses everything.

Some Internet companies are insanely profitable and more than justify their valuation, other companies… not so much 🙂

We are however in a social media bubble in my opinion, where companies with lots of traffic but less than impressive profits are overvalued.

In other words, I’m trying to explain that we’re only in a bubble when it comes to a certain sector of the Internet, social media sites.

However, this doesn’t mean there isn’t money to be made.

It’s clear to me that social media company valuations have nothing to do with fundamentals whatsoever (it seems some investors don’t care about “insignificant” details such as whether or not a company is actually profitable enough to justify its valuation) and yes, we’re in a bubble but I don’t think it’s about to burst just yet.

Therefore, there’s definitely money to be made if you position yourself accordingly. If you want to buy, then go ahead and buy but don’t make the mistake of thinking that these valuations make financial sense.

They don’t.

When it comes to social media sites, the market is irrational/exuberant.

Investors left and right are making emotional as opposed to rational decisions.

That’s just the way it is right now.

If you want to make money, don’t forget to keep your feet on the ground, understand that we’re in a bubble that will eventually burst and act accordingly.