MappingTheWeb //

Time and time again, people ask me, “Are we in a web 2.0 bubble?” And my answer has remained ‘no’ for quite some time now. Many are making comparisons to the bubble that burst in 2000, but I’m not convinced that the environment and conditions are the same.

Let me re-iterate that I am not living in the web 2.0 echo-chamber - or so I think. Every once in awhile, I try to step outside the boundaries of the online world to see the web from a non-techie perspective. It is very tough, to be honest. To me, sites like Flickr and Craigslist seem like household names that everyone knows about. But I’ve been surprised to learn that many of my friends and family had never heard of them. Nonetheless, I still do not believe we are in a bubble… yet.

I have taken several key factors into consideration before formulating my decision. These factors were present in the last bubble. Should these factors change, we may very well move into a bubble. They are:

1. Less IPOs - straight up, we are seeing less companies going public. The IPO hype and hoopla of the late 90s is gone. Companies are listing only if the decision makes sense from a strategy perspective. However, we are starting to see more and more tech/Internet IPOs in recent times. Should this trend continue, especially with small web start-ups, we may be in trouble.
2. Smaller Rounds of Financing - companies are raising much smaller equity rounds. Nowadays, a new venture can be started and operated on a much smaller budget than in the past. During the last bubble, anyone with an idea and a great Powerpoint could raise upward of $5, $10, or $20 million with relative ease.
3. Revenue Models - it would seem like a revenue model is essential for any start-up. However, the previous bubble indicated that this was not the case, especially on the Internet. Any site that could garner considerable traffic assumed that a revenue model or, at worst, an advertising model would fuel company growth.

As I mentioned earlier, I do not believe we are in a full-blown bubble. Having said that, if we continue to see flashbacks from the late 90s or the key factors listed above change, then hold on to your RSS reader and wiki as we may be in for a rough ride.

Today, Edgeio announced a $5 million Series A round of financing headed by Intel Capital. Subsequent investments came from Transcosmos Investments and Business Developments Inc. The basic premise behind the company is to aggregate classified listing from around the web and bring them together on a single site. Edgeio launched in March of this year amid a huge amount of hype and anticipation (as it was co-founded by famous TechCrunch blogger Michael Arrington) - only to receive a mild/lackluster welcome to say the least. But since then it has really started to gain momentum and recent developments look promising for the company.

When the company launched, their highly touted blog listing feature flopped. So recently, they’ve been downplaying this feature. Essentially, it allowed you to post listings from within your blog by tagging your post(s) with the term ‘listing’. You could also tag the post with other terms to further increase results. Nonetheless, Edgeio is now more focused on the aggregation strategy itself.

With companies like eBay, Cafepress, and Amazon now onboard, the company looks well-positioned to take the lead in the category moving forward. Add to that the fact that they just launched a Chinese version of the site (mulu100.com) and filed several patents pertaining to distributed marketplaces, and I think the company is taking the right steps to succeed.

As for the future of Edgeio, I see huge potential for a site like this. It reminds me of other aggregation and comparison business models including shopping (i.e. Froogle, Shopzilla, Pricegrabber) and travel (i.e. Travelocity, Orbitz, Kayak). There is obviously a strong business model at hand - now strong execution and implementation is necessary. Moving beyond the web 2.0 fluff to a sustainable business model will be the real challenge, but I’m confident Edgeio has what it takes.

From time to time, a company launches that is aimed to destroy a current business model. This new business model and/or technology is therefore called ‘disruptive’. In many cases nowadays, many new disruptive models have been made possible because of the Internet.

E-mail disrupted the postal service industry, Skype disrupted the long-distance market, Napster disrupted the record industry, and the list goes on.

Just less than a year ago, a new company called Jingle Networks launched. Jingle runs a service called 1-800-FREE-411. As you may guess, it is a number people can call to use the 411 number lookup system for free. How do they make money? They tack on a fifteen second ad after you request a phone number - but before you are given the results. Traditional companies in the space charge an average of $1.25 per request, but Jingle plans on chewing away at the market with a free, ad-supported model.

Already they are seeing impressive results and numbers. The 411 market is estimated at $8 billion a year in the US alone. This provides a massive opportunity. Apparently consumers don’t mind the ads as Jingle reportedly claims 3% market share already (or 450,000 calls a day).

Today the company announced a fourth round of financing ($30 million) headed by Goldman Sachs and Hearst Corporation (kudos to TechCrunch for some of this info). Based on the present round, the company is valued to be around $150 million. Altogether the company has raised approximately $60 million to date.

Though the idea seems rather simple at first, the execution behind it has been nothing short of phenomenal, especially given the short time period. I hope Jingle continues to prosper and I always look forward to seeing more disruptive services bite away at existing, stagnant markets.