Web 2.0 – not a bubble until it bursts

Over the last few weeks I have noticed more and more talk that this Web 2.0 thing is really a bubble and about to burst. For me it started with MySpace being picked up for US$580 million by News Corp and just getting hotter and hotter with the biggest indicator we are going to pop Google buying YouTube for US$1.6 billion! VC’s have lots and lots of money and seem to be throwing it at everything with Web 2.0 startups raising $US455.5 million in 79 deals so far this year, more than twice last year.

For me it is a bubble, period.

Today I see the Top 10 Lies of Web 2.0 has been published (via RSS Blog and Matt Mullenweg):-

  1. We learned our lesson last time.
  2. This is not a bubble.
  3. It’s all about community and sharing.
  4. Online advertising will pay for everything.
  5. These sites are so easy, my mother could use them.
  6. The analysts are trustworthy now.
  7. There’s no glut of social networks — young people are always up for trying something new.
  8. Our site is still in Beta.
  9. We’re different from all those other sites.
  10. We look forward to working with our new partners at Google.

I ponder what will happen to the likes of Jobster, Recruiting.com, Indeed, SimplyHired, recruit.net, mkt10.com, in2Vista etc post-burst. Will they be impacted, will they be profitable beforehand, should I get my cash together to buy so great assets at really, really low prices?

Checkout accounting jobs, UK at AccountantCareers.co.uk.

10 thoughts on “Web 2.0 – not a bubble until it bursts

  1. michael I think it’s a bubble when funding and acquisitions are ignoring basic business principles, namely revenue and profit.

    In the case of youtube Google has a tested platform (adsense /adwords) that can now be further leveraged by video to monetize the huge youtube traffic.

    Similarly with myspace the amount of mainstream traditional ad money looking for high quality online properties to advertise on is growing every day, this is not going to slow down..

    With a business like recruit.net the key word is business, the issues we deal with are a) how do you build your traffic, b)how do you keep your traffic and c) how do you monetize your traffic.

    So it’s not a question of the bubble bursting and the game being over, it a question of how good a business can you build.

  2. Maneck you are right on the money. If revenue is higher than costs you survive. But I do think we are in a bubble and it will burst.

    I am not 100% that Google (or News Corp) will re-coup their investment and only time will tell if it is a good one.

  3. Michael – consider that google currently generates around $10 billion / year from their text based PPC ads alone. Also shortly after announcing the youtube deal their stock price rose and their market cap increased by 2 billion! (some might argue that it has already paid for itself)

    I agree with you, only time will tell for sure..

  4. Google’s makret cap could drop by 10bn tomorrow and it wouldn’t prove Youtube was or was not a good investment. Personally, I think the most interesting aspect of it was the way it illustrates the limitations of Google’s brand: even with their global presences and technological mastery, they were better off spending gigabucks to buy YouTube’s audience than to try and create their own. Certainly makes the odds of a Monster acquisition look better, and eBay’s long term prospects a lot brighter.

  5. Mike, here are my response to “the 10 lies about Web 2.0”
    1. We learned our lesson last time.
    I think a lot of people learned from it. Not everyone. However, someone has to invest in R&D of Web 2.0, right?

    3. It’s all about community and sharing.
    It is. Internet itself is a web of users. Almost everyone has to deal with this community and sharing somehow today.

    4. Online advertising will pay for everything.
    Ad is not the only way to generate revenue for Web 2.0. There are many ways that Web 2.0 companies can generate money.

    5. These sites are so easy, my mother could use them.
    Future mothers can.

    7. There’s no glut of social networks — young people are always up for trying something new.
    Young people are glued with Myspace, QQ…

    9. We’re different from all those other sites.
    It is different. For example, the faster download and upload when more users are on Web 2.0 file sharing. It is very different from traditional PC and server download model.

    I think there may be a period of time that some Web 2.0 companies will die. However, some will become future Googles. Then we will have Web 3.0 on the way.

  6. @ Colin, very interesting point you raise on the lack of power around Google’s brand. I tend to feel they bought YouTube as a defensive play, to stop someone else picking them up.

    @ Nick I think you are partially right, unfortunately many companies are having advertising only business models, trying to build every site into a community and their own social network (I mean how many social networks can one person belong to), and release the same product as another person but feel they are different “because of how you build your social network using their tool”

  7. Michael, you said

    “I am not 100% that Google (or News Corp) will re-coup their investment and only time will tell if it is a good one.”

    News have already recouped their investment. They recently sold 3 years worth of textual advertising on MySpace to Google for $1.4bn

  8. Yes, you are right Kevin. Maybe I should say I am not sure Google will recoup their investments (both YouTube and Search deal with MySpace.

    Interesting I received an email from XBox yesterday prompting me to enter a competition. Part of the competition was a site were users ranked what was “in” and what was “out”. MySpace – Out in a major way.

  9. Michael,

    One has to wonder how many of the 150 million users of MySpace aren’t participating in the Xbox competition.

    Often these ‘competitions’ are aimed at trashing THE competition. For example realestate.com.au have launched a ‘competition’ called “MyHome sucks” asking people to say why their own home sucks, with a prize for the best comments. Of course this has nothing to do with the fact that PBL are about to launch a real estate site called MyHome 🙂

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