(MoneyWatch) For years, the technology industry and its investors have been hot for social media. Facebook (FB), Twitter, Tumblr, Foursquare -- the emphasis has been on helping Internet users make connections. But change seems to be in the air, as "social" loses luster in favor of startups that do a better job of generating revenues.
In other words, it's no longer enough to focus on what is cool. Or, rather, what is cool has become what makes money.
At well-known tech incubator Y Combinator, the mania for social-related companies seems to have run its course, with investor valuations of new companies having fallen by half at the top end of the range. The problem for social network companies is revenue. Many of these
companies started with a focus on getting users, thinking they would
eventually figure out how to mine their traffic for sales.
To be sure, some of these players do make money. But they don't make enough to justify the levels of investment they've received. Take the dominant social media company of its time, Facebook (FB). Its revenue levels don't come close to all the money that has been put into the social networker. Foursquare, Pinterest and Tumblr are all working to develop new revenue mechanisms, whether through improved advertising or on the personal data they collect.
Instead of social media, many venture capitalists are looking at such investment areas as "big data" or business-to-business services. It seems tech investors are losing faith in the idea of making money off customers of what are, after all, free online services.