Kara Swisher created a little storm on TechMeme with a post called “Twitter, where no one knows your name“. In it she noted that no one really nows what Twitter (she asked a few friends). This created the usual river of replies. I liked the replies from Steven Hodson and Frederic at the Last Podcast best. The post isn’t a masterpiece of fundamental research, but Kara hits something that I have been thinking for quite a while now.
The web 2.0 industry, I thin we may call it an industry by now, is becoming a mature and therefore inert industry. The speed of innovation is dropping fast, just look at the number of truly innovating or new services you have seen the past few months. There are thousands of startups working on great idea. But most of these ideas are small improvements or tiny nuances in things that already exist. I tried to compile a list of services that fundamentally changed the way things work right now, but couldn’t make it a long list.
This is a pretty normal phenomenon. Someone starts the cycle with a great idea, starts killing the “old school” market leaders, and then others jump on the bandwagon and a new industry is born. This is a pretty healthy way of working.
The thing that I find interesting about this is that the web 2.0 industry differs a bit from that. I believe there is a web 2.0 industry (the massive amounts of people and companies working on it), but I am not so sure there is an equally large market. There are a few huge players making loads of revenues, but the rest is burning up venture capital. The web 2.0 industry in my opinion is by large a bubble that needs deflation pretty quickly. There are way too many startups working on the same ideas, the same services, the same small problems that need solving. Too many of these initiatives are based mostly upon technological capabilities, not so much on user value. It leads to an incredibly fragmented playing field where everyone tries to survive. And this whole thing is pretty much fueled by the Tech Blogosphere.
There isn’t a single day without “breaking news” or a “cool” new startup being mentioned on TechMeme, TechCrunch, or any other news source. Everyone, eager to be the first, jumps up to review and write about the next thing, which often turns out to be the same thing. Everyone copies the same stories, brings it as their own. It’s a death grip fueled by traffic, advertisement, personal glory, whatever.
It seems venture capitalists don’t know where to invest their money anymore. There is too much and at the same time not enough of it. We get all crazy about the next idea concerning video, pictures, social things, desktop air thingies, aggregators, aggregators of aggregators, which all ad up to the same “freemium” business model. Everyone looks at traffic (wow, Friendfeed just saw a huge spike last month), only to find that it is that same Tech circus creating that traffic. Most innovations don’t get to leave Silicon Valley. They start there, using the tech blogging elite to build up pressure and create the “aura of success”. But very few of them actually get to leave this bubble and conquer the rest of the world. Most of them remain in the bubble, buidling up pressure with traffic created by the Tech Elite. Never making a buck from a real customer outside this bubble.
And who is paying for all of this? To me it seems that the old industry ends up paying for this mess. Venture capital is used to take the risk, to create the pressure. But the main ingredient of most business plans isn’t customer value. It is getting prepared for a take-over. You can’t build an industry on that premise. If a company’s sole purpose is to get investment after investment in order to get sold at the highest bidder, then there isn’t any value created. There is only destruction. And the sucker that buys it last is the one that pays for the mess. Often old industry trying to become hip and cool in the new world, only to discover that they didn’t really understand this new world and bought something quite useless for too much money.
Does that mean that all efforts in this web 2.0 industry are futile, that if you are in a startup there isn’t value being created. Of course not. I’m pretty sure there are lots of great teams out there working their heads off to create the next miracle. But before you think about leveraging the Tech Elite Blogosphere for your own success you might want to think again. Getting into the web 2.0 bubble might be an easy thing to do. But the question is, who is going to let you back out into the real world and real customers? You might see lots of attention in the blogosphere, venture capital poured into you company, traffic spikes. But can you make it outgrow Silicon Valley? Can you break through the barriers of the web 2.0 industry and make the jump to the consumer or business market? Can you resist the tech blogosphere screaming hurray, or demanding new functionalities that any normal person would never need. I hope so. Because in the end, in the outside world is where the real value is being build. The rest of it is just a lot of money and hot air being pumped around the same isolated web 2.0 bubble.
Does anyone have a needle ;-)