Furniture chain Ikea made a few headlines this month with its comments that we might have hit "peak stuff". That seems unlikely. There are still a lot of things we want, even if we don't want to assemble them ourselves. But we may have hit a peak in something else something far more serious for the stockmarket. I'm talking "peak connecting".
Twitter's share price is cratering. Now it looks set to go through more management reshuffles than Chelsea football club. Friends Reunited, one of the first social networks, is shutting down. LinkedIn's share price is under pressure, as are the prices of many other hyped-up companies that have found ways to put us all in touch with one another.
The reality is that we may be reaching simple physical limits on our ability to post and message. If so there could be a lot of pain ahead for the stockmarket. Why? Because the valuations of those firms are so high and they are often propping up whole indices.
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A tweet from the Pope
You don't need 140 characters to describe how Twitter is doing right now. Ten will do: "in trouble". Its share price has been under pressure for months. Last April it traded above $50. Now it's below $17 (see chart). Founder Jack Dorsey has been drafted back in to help sort it all out. He has rejigged senior management and there's even talk of increasing the number of characters allowed per message. Whether this does anything to improve Twitter's fortunes remains to be seen.
Maybe this is a blip, or Twitter-specific. But it might be the start of something more serious. The world of 24/7 total connectivity may have been to put it mildly oversold. The ability to update the world on everything we are doing all the time, and to make new contacts, is one of the most powerful applications of the internet. It has changed the way we interact and mostly even though there is nastiness and bullying online for the better. Pope Francis has described social media as a "gift from God". If the Pope says it is OK, it is hard to disagree.
Too much information
Yet, just because it is quite useful does not mean that demand for it is unlimited. We don't really need to connect with that lawyer in Brisbane we've never heard of and the world doesn't really want to know what we think of #NationalBreakfastWeek in 140 characters. Once you have reconnected with an old school acquaintance who you didn't actually like enough to keep in touch with, learned that your ex-girlfriends don't still carry a torch for you, let the world know that you think Donald Trump is a total bozo, and that you were very sad about David Bowie dying, there is not much else to do. It was fun for a bit and then we got bored.
There are two more serious problems. Firstly, there is only so much connecting we can do and we may have reached that point. Any kind of social media network depends on our willingness to provide it with lots and lots of free content. But given that no one gets paid for it, there are limits to how much time they are willing and able to devote to that, no matter how keen they are.
Secondly, there is a limit to the number of social networks we can keep up with. If any industry ever looked like a natural monopoly, it's this one. It makes it far easier for everyone if there is just a single network and everyone connects on that. That will almost certainly be Facebook, and everyone else might as well just forget about even playing in the same industry.
The next tech bubble and bust
The trouble is, a huge amount of stockmarket wealth has been tied up in these companies and their suppliers. The Nasdaq index's ongoing rise is dependent on an extrapolation of huge revenues from all the smart devices and services that connect us. Venture capitalists are still throwing vast sums at every entrepreneur who comes up with a new network, or a clever way of making a bit more money from the ones that already exist.
It is not just the social networks (Facebook is one of the biggest stocks in the Nasdaq) that trade at huge valuations so do the companies that mine them for data, run games on them, or use them to reach customers or provide traffic. Social media has created its own economy and it is a pretty big one at least in valuations, if not in revenues.
But if it turns out to be a fad, or not as ubiquitous as we thought, they will all crash, or at least start to lose value. Once the hype is gone, there will still be some substance left, but probably not as much as investors hoped. Fifteen years after the last tech collapse, it could happen again. Forget plunging oil, which should in time be good news it may turn out to be peak connecting that punctures the bubble and takes markets down.
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