No we are not at the start of a Web 2.0 BUBBLE. We are at the beginning of the Web 2.0 investment CYCLE.
We are starting up the curve where investment, attention and innovation are rising. A BUBBLE is later up the curve.
A BUBBLE has a negative connotation and implies that negative things can or are happening. The question you would be asking in a bubble is "Everyone has made a ton of money, can this get any bigger or should I get out now before the floor crashes through?"
How much weight should we assign to the decrease in cost to entry between '99 and '06 in calculating the point at which we're saturated with startups? How many local event (and share your plans with your friends!) evite competitors do I need to have access to? It's getting a little out of hand.
When Web 2.0's cycle increases to the point of a bubble and explodes in a rainbow-reflective-gradient shower of glossy logos, it won't be the VCs that get burned, it'll be the little guys hunting VC (or profitability) who rolled their own and failed or didn't succeed in a stellar way. It'll be much, much quieter than the dot-com bomb.
I'm actually pleased to see projects starting to end up in the TechCrunch deadpool, and I'm waiting to see if traffic to FuckedCompany.com starts increasing.
I think negative things are happening. Too many "younglings" are living a false dream that they can make money by redoing a myspace, a blogger, a youtube. Seriously, there is no value addition between one project and another. Younglings are trying to figure out if they can do NOW what, say, youtube did 2 years ago. And other friendly younglings flock to these web sites for no apparent reason, other than friendliness.
I think the VC-s need to send these guys back home and request them to send a mail to, say youtube, on how it can improve its service, in stead of pouring other people's retirement money on useless idiotic-video-clip sites.
I think I can count really useful web 2.0 services on the tip of my fingers. Meebo obviously counts as first (and possibly a truly innovative service). But, most others better start reporting to f*ckedcompany.com soon.
A financial bubble means that people are buying something less for its inherent value and more b/c they think that other people will buy it for more. Look at real estate prices. They should always be determined by people's salaries. The amount a person can pay for a mortgage is directly proportional to their salary. Salaries haven't been increasing much lately, but in the last few years real estate prices have gone through the roof. So home owners accept that they will be over-stretched in the short term in the hopes that they can "flip it" for more. Since people have become falsely convinced that "you can't loose in real estate" they are happy buying overvalued houses b/c they "know" that the price will only go up. The problem is you eventually run out of suckers. Eventually people say, this one bedroom condo is not worth a million dollars. After the notion that real estate prices "only go up" is disproved, the bubble quickly pops.
This is all to say that financial bubbles require lots of "transactions" for the positive feedback loop to take hold. People have to see the price going up up up up up up up enough to get hypnotized. Since there are very few public web 2.0 companies I don't see how this can happen. The transactions in Web 2.0 come from angels, VC's and big companies making acquisitions. Since there are very few transactions in the cycle there is little opportunity to pump the price up and pass it on to suckers. Also the suckers in question are professional investors and big software companies. While they may make amazingly stupid decisions from time to time, they are not nearly as stupid as the hordes of unwashed E-traders.
I think the real question is, "is Web 2.0 oversaturated?" That's a very different dynamic than a bubble.
Huh! When I first submit this question, I didn't get the text box! Anyway, my main question is as follows:
-> Are we at the start of a web 2.0 bubble? I say this because I see (way) too many startups doing the same thing over and over again (e.g.: social networking, web based im, wiki/blog backed news feeds, web based video, etc). Some of the newer ones are trying to add some money making (biz model as the vc-s like to call it) tactics to the whole game, but, mostly, most of these startups have no real monetary benefits.
-> If we are at the start of a bubble, when will it burst?
-> When the bubble bursts, how bad will it be this time: global economic meltdown?
A big difference between the .com bubble of the late 90's and the situation right now is in the number of companies applying for an IPO. That number is still currently a fraction of .com bubble levels.
VC investments are on the rise but still lower than at the peak of the bubble.
When looking at these statistics it doesn't yet resemble what we saw in the late 90's. Maybe people learned their lesson. Or it could be just the resulting chilling effect from the Sarbanes-Oxley Act... Its a lot more difficult to go public nowadays.
We are starting up the curve where investment, attention and innovation are rising. A BUBBLE is later up the curve.
A BUBBLE has a negative connotation and implies that negative things can or are happening. The question you would be asking in a bubble is "Everyone has made a ton of money, can this get any bigger or should I get out now before the floor crashes through?"
I don't see anyone in that mindframe yet.