Global giants may have sprung virtually overnight from the white heat of the digital revolution, but however inexorable their rise may seem, the savage reality of the milieu is that, for most, disaster lurks a mere heartbeat away.
Just ask the big boys: the Facebook stock-market flotation has been cast into confusion by doubts over its business model and the threat of legal action; Google is locked in a long-running judicial wrangle over privacy with the EU; and the once-mighty Yahoo! is on its knees, haemorrhaging staff at an alarming rate.
Meanwhile, the suspicion is growing that young web users – some put off by privacy issues and others by such services' lack of cool – are slowly turning their back on the great institutions of the internet age.
The sector's travails come at a point that should have provided the perfect moment for the biggest of online corporate beasts – the coronation of a queen to rule over the unlikely global empire of a 28-year-old dot.com billionaire. Yet stalking the nuptial celebrations at Facebook founder Mark Zuckerberg's palatial Californian home last week was the bloodied spectre of looming disappointment, a ghost that many commentators suspect may take years to exorcise.
Almost as soon as it had reached its peak, the bloated enthusiasm that valued the social network's shares at $38 apiece and then saw them plummet by 15% within days had been punctured. Concerns over the viability of a business that has struggled to attract significant revenues from advertising, coupled with doubts over the company's ability to adapt to a growing body of mobile users, have cast a stark light on the reality that, despite all the hype and all of the interest from businesses in social media, it only commanded 4.6% of digital ad expenditure across the entire internet in 2011 and – according to Forrester Research – will see this share grow by less than 2% by 2016.
Amanda Davie, managing director of digital management consultant Reform, said that post the IPO [initial public offering] of Facebook shares, the company "will need to meet some very tough business and revenue targets, and there has been little evidence to indicate exactly how it will satisfy its shareholders, leading many to fear the digital media is poised for another dot.com bubble burst. That probably won't happen, but does beg the question – is Facebook, and indeed social media as an industry, mature enough yet for businesses and investors to see a positive return?"
History has a habit of repeating itself, and at a point where analysts have seen Google complete its transformation in some perceptions from cheeky internet upstart to sinister global behemoth while simultaneously watching services like MySpace steadily decline, many commentators fear that once again, the dot.com sector's hype and bluster has amounted to little more than another case of the Emperor's new clothes. Memories of the sector-wide crash in 2000 that saw dozens of high-profile businesses like Boo.com, Geocities and Pets.com go to the wall have been reawakened, with the same mistakes once again being highlighted.
"It's all about scale. An internet business can go from five users to five million within two weeks, so it's right to hype the medium, and valuations take this ability to scale into consideration," said Andreas Pouros, CEO at digital marketing agency, Greenlight. "The channel is absolutely game-changing, but what isn't right is to assume that the internet can make a poor business model suddenly become the best thing since sliced bread.
"A single platform can't be the linchpin of the internet. That is why some of the hype around Facebook being the centre of the digital universe should be critically examined."
None of this, of course, is necessarily the fault of either Zuckerberg or his business. Many industry insiders believe there is nothing fundamentally wrong with Facebook from a commercial perspective, but that in this case, people got over-excited about their latest new, shiny toy.
Of course, it's not worth $100 billion, they say, but give it a few years, some shrewd moves and $20-$30bn in annual revenue with a 40% net margin, and certainly the company will be worth that – it just rests on too many unknowns today. "You want to know what the trouble is with these businesses and the markets? Simple: it's greed," says angel investor Jon Walsh of Media Ventures.
"Greed by the initial VC's [venture capitalists] to maximise their return on their investments, greed by the founders to be richer than the next, greed by the banks who all want the fees for that big exit or IPO, and finally greed by the public buying the stock on flotation hoping that this will be their nest egg or get-rich-quick opportunity. We are all to blame, because we can all in many ways be guilty of the same avarice."
Part of the problem with floating huge consumer businesses is that the message to the investor is often very different to the message to the users. For the public, Facebook is all about functionality and, like Twitter, has become a way of life for many. Its users are interested in functionality and accessibility while investors are interested in revenue, and that creates a fundamental conflict that the internet giants must come to terms with if they are to prosper in the long term.
"Facebook needs to spell out exactly how it intends to use user data and traffic for financial gain, in order to attract and appease investors. In doing so, however, it runs the risk of damaging the relationship of trust with consumers, where they stop focusing on the site's functionality and start focusing on what it's doing with their data," said Andy Ley, corporate partner at law firm HBJ Gateley.
This fundamental dichotomy, in which the web is pulled in two different directions by two very different groups, is the issue many believe lies at the heart of the sector's struggle to realise the full extent of its imagined potential as a commercial vehicle.
"It's hip to be involved in social media, and many businesses and individuals are investing in the channel because by doing so they believe they will give the impression of a young, cool enterprise that's going places. The problem is that when businessmen get involved in anything, that pretty much guarantees that it will soon become completely uncool," said Professor Cary Cooper of Lancaster University, chair of the UK Academy of Social Sciences.
"Now that the moneymen are inside the web's great standard bearers, there's a big question mark over whether these services can maintain the connection they have with the public," he added.
While some may harbour doubts over the dot.com sector's ability to maintain the connection to users that powers its success, many digital-media insiders believe the industry's current woes represent a temporary blip. This marketplace is still in relative infancy after all, they say, and such challenges are to be expected.
"Rather than being evidence of the sector's death rattle, the difficulties surrounding companies like Google are symptoms of an evolving industry," said Rebecca Quinn, head of European strategy and operations at social-media marketing company, Wildfire. "Facebook's IPO might be attracting negative comment now, but in the months ahead it will power massive investments into innovative social-media projects to grab the public's imagination. Far from being the end, this is just the beginning."
While Google's diversification into multiple sectors from book publishing to mobile phones have laid what most analysts believe are the foundations for a sustained future, what Facebook does next will be crucial. The fact that 44% of its users say they would never click on advertising may necessarily limit revenues, but if rumoured plans to broadcast sporting events and major shows through the site come to fruition – not to mention any one of a number of expected initiatives to capitalise on the many hours users spend on the platform – then a multi-billion dollar income stream may not be the stuff of fantasy after all.
Technology broadcaster Colin Kelly, social-media trainer for Glasgow-based NS Design, added: "In many ways, what will determine the future of Facebook and services like it is the outcome of the battle currently under way between the suits and the geeks. If the short-term investors hold sway they may well swamp the site with advertising and drive users to another service. If innovators and evangelists who are in it for the long term retain control, however, then we're more likely to see a period of sustained development that will retain the loyalty of its users and carry the service to brand new heights."