Mapping The Web - Web 2.0 Commentary and Opinions

November 5, 2006

Web 2.0 Bubble?

Filed under: trends, off topic, financing — Aidan @ 3:08 pm

Time and time again, people ask me, “Are we in a web 2.0 bubble?” And my answer has Web 2.0 Bubble?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. 2.0 Bubble? digg:Web 2.0 Bubble? reddit:Web 2.0 Bubble?

2 Responses to “Web 2.0 Bubble?”

  1. Ankit Says:

    Web 2.0 is still living in echo chamber. Everyday you get new flashy apps and interfaces which do excite people living in this Web 2.0 echo chamber, but for a person who is not so net-savvy things are becoming more complex.

    Craigslist and Flickr became household names because they were very easy to use and they tried to solve problems which a normal person faces everyday. But as broadband is penetrating, and more and more people are jumping on the bandwagon, Web 2.0 startups who concentrate on simple interfaces will definitely get a lead.

    But I also want to add that today we are living in great times, it’s easy to be entrepreneur and build a startup with less resources and small teams as compared to few years ago. Online Advertising has matured enough to support many early stage startups. Many of them are able to fuel themselves with their own earnings and don’t need external funding. One of the examples is “blog networks”. Blog Networks have the potential to stand shoulder to shoulder with old traditional media with their niche offerings and diversified content.

  2. Aidan Says:

    Hey Ankit,

    Thanks for stopping by. Some very good points there.

    It is definitely exciting times and I look forward to seeing the evolution of such things as blogs and online advertising as well.


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