The web 2.0 bubble is building up pressure, who has a needle?

Steve Rubel wrote a nice article called “The web 2.0 world is Skunk Drunk on its own Kool-Aid”. He talks about his own career where he wrote many positive articles about any new site that would come along, until he realised that he became less interested in every shiny little site that came along and more in social change.

I like the article. It is from the heart, and Steve talks about things I have written about myself a few times. Steve especially hacks in on startups trying to make an easy buck and the bloggers that make a living blogging about it.

I think it is not only the startups going after the quick bucks, it is also the investors trying to gain value on the very short term. And don’t forget the “traditional” media companies losing their own territories and now moving into the on-line world trying to play the same old game there. This whole eco system is being fed by a bunch of tech bloggers that really are way too far off the real world to know what the needs are of real users.

Every site bringing the same scoop, talking about the same (pre-orchestrated) new products. There is a bubble building up pressure fast. Luckily it is contained within the Bloggers vacuum. I checked with my friends who are not so tech as I am, and they live their lives normally without being distracted from another “social life saving” service. Phew, we’re in the clear there.

But my main concern is that the one thing web 2.0 brought us, “free (but ad-bases) services” is now exactly what we need to get rid off in order to move out of web 2.0 into something new. Innovation that is user centric, not ad centric or social network centric. Innovation that leads to truly valuable services for its user.

So who has the needle? Who will deflate this self created web 2.0 bubble and help us focus again on the one thing (the user!) that really matters? Maybe the innovation comes from an unexpected, old-fashioned and outdated service called e-mail? I do know there are some bloggers out there that are focusing on things that are important, so there is still hope for us all.

Short Update:

After I posted this, I noticed that the discussion intensifies in different directions. John Heilemann posted another message called “Web 2.0 bubble” in New York Magazine. When reading it I first thought it was an article that could help providing some direction in this discussion. A little math exercise shows the financial size of the bubble we are in when John states:

It doesn’t require a Mensa-level IQ to make the case that the Web 2.0 boom is in fact a bubble. There’s the glut in venture capital: $3.4 billion invested in fledgling Internet firms in 2007, the most torrid pace since the height of the Web 1.0 mêlée. There are those lunatic valuations: A year ago, the burgeoning social-networking outfit Facebook was nearly bought by Yahoo for $1 billion; today, the price tag is $15 billion, an eye-popping number that did nothing to dissuade Google and Microsoft from bidding richly, fervently, to buy a tiny sliver of the company—a competition that Microsoft finally won last week. There’s the frothy run-up in the nasdaq, which has lofted Amazon’s stock back to its all-time high, has inflated Yahoo by almost 30 percent this year, and is rapidly propelling GOOG toward $700. And then there’s the flood of derivative, dum-dum start-ups inducing a severe case of dot-com déjà vu. To wit:

But he misssed a turn completely and drove it to a discussion on the difference between VC’s in NY and in the bay area . He ends the article with the following quote:

It’s a culture also riven with envy, to be sure, the direct result of Gotham’s collective inferiority simplex when it comes to matters Webby. “People in New York feel a chip on their shoulder because they’re not in the center of this thing,” says Seth Goldstein, a longtime Silicon Alley player now decamped to Marin County. “The question is, why didn’t Netscape start in New York? Why didn’t Google start in New York? Why didn’t Yahoo start in New York? It’s that things are able to percolate here, not because of idealism but because of a willing suspension of disbelief.”

Sorry John, too much emphasis on sidetracks. It is not the nature or location of a VC that leads to web 2.0 bubble decisions I think the bubble pressure is increasing because too few entrepreneurs are concentrating on user value.


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4 Responses to The web 2.0 bubble is building up pressure, who has a needle?

  1. Too many startups doesn’t mean there is a bubble. With the exception of a few overly valued companies, most of the web 2.0 activity consists of under-funded small startups from 2-3 people who’ve known each other for a while and finally decided to leave their cushy job and take a risk.

    I just don’t see widespread “irrational exuberance” among investors, which to me is the hallmark of a bubble.

  2. Pingback: Web 2.0: Is the Bubble About to Burst? | Gauravonomics Blog

  3. Alexander van Elsas says:

    @Jordan. I can’t really agree with your conclusion, although the observation is correct. Yes, most web 2.0 companies are being formed by 2-3 people deciding to take a risk. I think that is great, because a few of them will have teh one great idea that helps us all forward. But the main concern is the companies that get funded well over the 2-3 people stage. There are so many of them, and when looking at their business model (as an outsider) I cannot help but feel that many entrepreneurs and investors are looking for the quick win. This becomes allmost a self perpetuating enginge as many of the main techblogs write about the same stories, and more startups and investors jump the same (ad-based) bandwagon with the avalanche Facebook being the lead example to all that are in desparate need of fame and cash. But in the end, the avalanche will fall down and when dust clears new things will arise. Do you agree on this observation, or do you think there are still many entrepreneurs out there with innovative business models and a healthy focus on user centric services.

  4. Pingback: why it’s easy to loathe 2.0 « Rolf Skyberg

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