Steve Rubel started talking about it yesterday and, within a day, everyone is talking about the web 2.0 bubble –
The bubble really began in earnest when Google bought YouTube. That’s when every person with an entrepreneurial itch woke up and smelled the hype and money. Prior to then, startups were more focused on the entrance, not the exit.
John Heilemann at the New York Magazine argues both sides of the case but fails to make up his mind –
There’s the glut in venture capital: $3.4 billion invested in fledgling Internet firms in 2007, the most torrid pace since the height of the Web 1.0 mêlée. There are those lunatic valuations… There’s the frothy run-up in the NASDAQ… And then there’s the flood of derivative, dum-dum start-ups inducing a severe case of dot-com déjà vu.
Despite some tremors, online advertising is now a juggernaut that promises to only become more powerful as companies like Facebook start creating sophisticated networks where fine-grained behavioral targeting is possible. More than 1.3 billion consumers around the world now use the Internet, and the global growth curve is steep. Meanwhile, the main source of unbridled mania in the nineties, IPOs, are a non-factor this time around. Instead, the boom is being driven by giants with riverine profit flows and vast reservoirs of cash.
Don Dodge thinks that we have entered stage two of the web 2.0 bubble –
Bubbles go through predictable cycles. Bubbles emerge from the ashes of despair. It takes a while to gain momentum but eventually greed overtakes fear and we are off on another bubble adventure. The first stage of a bubble is when most smart money declares we are NOT in a bubble…it is different this time. The second stage is more dangerous. Many people agree that we are in a bubble, but it will last another year or two, and there is still money to be made. The third stage is when the bubble has burst but most people are in denial and think it is a temporary set back. The fourth stage is when everyone agrees the bubble has burst and life will never be the same. My guess is that we are now entering Stage Two of the bubble cycle.
Alexander van Elsas feels that the web 2.0 bubble is being fed by a small group of investors and tech bloggers –
I think it is not only the startups going after the quick bucks, it is also the investors trying to gain value on the very short term. And don’t forget the “traditional” media companies losing their own territories and now moving into the on-line world trying to play the same old game there. This whole eco system is being fed by a bunch of tech bloggers that really are way too far off the real world to know what the needs are of real users. I checked with my friends who are not so tech as I am, and they live their lives normally without being distracted from another “social life saving” service.
Marc Andreessen tells John Heilemann that there’s no bubble to begin with –
If you’re going to call a bubble on the basis of lots of bad start-ups getting funded and failing, then you have to conclude that the industry is in a perpetual bubble, and has been for 40 years.
– then writes a satirical post on his own blog –
OK. You’re right. It’s a bubble. A huge, massive, inflating bubble. We’re all doomed. Doomed, I say! DOOMED! It can’t last. It won’t last. It can’t won’t not last… The sooner we all get back to 2003, when the few surviving companies had huge giant markets all to themselves, with no competition anywhere in sight, because everyone knew the world had come to an end, the better.
And, if you thought Marc was funny, Geek and Poke, like always, managed to do better -
While I’m no expert myself on such grave matters (no puns intended), it seems to me that the sky-high valuations of web 2.0 startups in itself isn’t reason enough to write off web 2.0. Yes, there are too many me-too photo-sharing/ video-sharing/ social networking sites, but the most visible ones are based on solid revenue streams and are backed by established companies with deep pockets. Yes, a shakeout seems overdue, but doomsday? I don’t think so.
