

Ask HN: Bubble 2.0 - what lessons were learnt the first time around? - lwhi

I'm increasingly reading reports that we're about to enter another period of gross over-valuation and increased speculative investing.<p>This article [1], describes a possible bid of $6-$8 million, for a web-service that hasn't even reached beta.<p>Assuming this kind of story is a warning sign, and we are approaching another period of lunacy; is it possible to glean anything from the last bubble?  Were any lessons learnt?  Do any of you have any advice for getting through this kind of scenario with the least amount of trauma?<p>[1] http://techcrunch.com/2011/02/02/hipster-groupon/
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keiferski
I wasn't around during the first bubble, and I don't actually run a company
presently. (So take this with a grain of salt.)

But from my perspective, most of the failed sites in bubble 1.0 didn't
actually have good products - they didn't actually sell a basic 'X product' to
'Y customer'.

I think the same thing is happening now. Just look at Path, Hipster, etc.
being valued at super high numbers. These sites don't actually have a real,
solid business model. They're just social networks.

(In my opinion) the startup community needs to stop making social networks and
pseudo-businesses and focus on real products and real problems, like the rest
of the business world has for centuries.

~~~
sagacity
>>most of the failed sites in bubble 1.0 didn't actually have good products -
they didn't actually sell a basic X to Y customer.<<

Some counterpoints to ponder:

1\. Y (i.e. Internet user base) then was much smaller, as compared to what it
is today

2\. wombs of the WWW were barely pregnant with eCommerce (if it was known by
that name) then

>>I think the same thing is happening now.<<

IMHO, there are _major_ differences involved: in addition to 1. and 2. above,

3\. means to monetise eyeballs (traffic) were scarce then (random, untargeted,
ROS banner ads - $15/20/25 CPM, anybody?). Heck, (m)AdSense wasn't even
around!

I could go on, but let me conclude by saying that (even) non-monetised or
barely monetised eyeballs/userbase/traffic has much more commercial/valuation
potential today as compared to bubble 1.0 days.

What do you think?

~~~
keiferski
1\. Very true.

2\. Also true, but I think there's somewhat of a distinction between eCommerce
and all web businesses (at least what I've been led to believe.) ECommerce is
selling offline things online, or rather, selling products through an online
channel. Zappos, Amazon, 37 Signals etc. are examples of this.

On the other hand, many of today's startups don't actually sell anything. They
have a feature, not a business. Is Path really an eCommerce site? Hipster?

3\. True, but again, ads aren't exactly a "product". They're an extra level
above your service, and are notoriously much more difficult to pull off
successfully. Also, I think that most people (customers) have a strong disdain
for advertisements, on a whole. I wouldn't rely on ads to power a product
indefinitely into the future; personally, I tune out almost all all
advertisements, and I know many people who do the same. Building a business on
a fluctuating ad market doesn't seem like a great business model to me.

Selling products, however, is much more concrete.

~~~
cheae
The entire Television industry is being supported by ad revenue for decades.
Why can't the same model work for the web?

~~~
keiferski
[http://techcrunch.com/2009/03/22/why-advertising-is-
failing-...](http://techcrunch.com/2009/03/22/why-advertising-is-failing-on-
the-internet/)

(Techcrunch, I know. But it's a really good article from an academic.)

From the article: _People don’t trust ads. There is a vast literature to
support this. Is it all wrong?

People don’t want ads. Again, there is a vast literature to support this.
Think about your own behavior, you own channel surfing and fast forwarding and
the timing of when you leave the TV to get a snack. Is it during the content
or the commercials?

People don’t need ads. There is a vast amount of trusted content on the net.
Again, there is literature on this. But think about how you form your opinion
of a product, from online ads or online reviews?

There is no shortage of places to put ads. Competition among them will be
brutal. Prices will be driven lower and lower, for everyone but Google._

Also, don't forget that the NYTimes is instituting a paywall, and the Wall
Street Journal already has one. These sites obviously couldn't function solely
on ads, and they get massive amounts of traffic. Likewise for Hulu: they
couldn't get by with ads alone either. Unless your web business has an
extremely low overhead (read: simple web functions) I seriously doubt ads will
be enough.

~~~
sagacity
>> The entire Television industry is being supported by ad revenue for
decades. Why can't the same model work for the web? <<

Well-said. As a matter of fact, it can; and it is, today.

(Those who are not convinced, just look at Google's IRS filings for the past
2-3 years.)

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gyardley
Trauma? Bubbles are great for founders - while they last. Look at it as an
opportunity - there's a reason why "Please God, just one more bubble" was a
popular bumper sticker for a while.

The primary takeaway from the first bubble is that there's never a bad time to
realize a profit. Don't let it ride - put the money in your pocket whenever
you can.

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sursani
This is absurd. I am working on my internet startup as we speak and reading
news like this really disappoints me. Why is our country all about a quick
buck or fast cash rather. We move from Internet bubble in late 90s to Housing
bubble in the '00s back to the Internet bubble... is housing bubble next?

~~~
keiferski
My bet is on an educational bubble (although it isn't strictly comparable.)

