Wall Street Journal Online has published an interesting email conversation between two venture capitalists, Todd Dagres and David Hornik, about Web 2.0 today. They discuss if Web 2.0 is a bubble already or not. Dagres thinks it is, Hornik diagrees. But read for yourself.
I think it isn’t a bubble yet. Surely there are many Digg, Flickr, MySpace and YouTube clones around and billions of dollars are spent on small startups by venture capitalists. True as well. But that is not a bubble already.
But what defines a bubble anyway? Or better, what were the consequences of a bubble if it burst? The stock market wouldn’t be affected dramatically. There has hardly been any IPO yet. The only one I can think of right now has been Xing which funnily enough has been a European one. So there are no shares to drop like in the dot-com crash of 2000-2001. Venture capitalists will lose money. That’s right. But are Web 2.0 startups any more risky than biotechs for example? I doubt it. And I bet biotechs need way more capital than any Web 2.0 startup. Though I have yet to hear that every biotech is profitable.
It is actually quite disturbing that many people are only focusing on business plans when talking about new web services. Firstable those small companies try and use new technologies and develop crappy, mediocre, good and even excellent products and services. Either those technologies, products and services will be adopted by big companies like Microsoft, Google and Yahoo or they will aquire those small companies (hey, that’s an exit strategy).
We still have to see any of the new companies staying independent and becoming profitable (revenue through advertisements and/or paid services) but I am pretty sure that the new Google already exists.
And what about media attention and public perception? There has been some more attention since the MySpace and YouTube deals but ask your colleagues if they know about Digg, del.icio.us, Flickr or Last.FM. Most have not heard about those services.
A bubble? No.
Tags: David Hornik, Flickr, good and even excellent products, Google, media attention, Microsoft, MySpace, Todd Dagres, Wall Street Journal, Wall Street Journal Online, web services, Yahoo, YouTube
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all good points. i agree 100%, and i think we’re on the same page.
the web is for us, who cares about the bubble… who cares about the conversation regarding whether it’s a bubble, thus being a bubble that could pop. it’s all rubbish, because the web is for the people, and it just keeps on going based on what the users decide…keep up the great work!
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Thanks for the comment, Matt. Yes, the web is for the people. If there is someone who can make a living by offering great services more power to them. Though companies, vc’s and analysts have to realise that they can’t force things.
Anyway, I will listen to your Guilford recordings with Jason Sloan now.
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