Numerous new social networks launch betas every day. People are sending invites offering their virtual friendship to their real world friends or just strangers. Corporate social network applications target enterprises offering premium wiki and blogging tools. Owners of Web 2.0 businesses are trying hard to attract more users by inventing “never seeing before” features. Moreover, social network oriented B2B solutions popping up like mushrooms after the rain. At the same time investors are showing their interest in this market.
All of that reminds me late 90s followed by dot net bubble burst. The question is it going to burst this time? I am not an expert. I am not a psychic either. Here is my personal overview of the problem.
We have learned an important lesson after dot com bubble burst: Don’t overestimate the value. These days’ VCs are more skeptical when evaluating startup companies. More importantly entrepreneurs develop their business model with this in mind. Of course a lot of Web 2.0 companies try building business for sale as described in “Built To Be Bought (Bubble 2.0)” article by David Hornik. Here is a quote:
“…If companies are indeed again being built for acquisition rather than independence, venture investors are in for a rude re-awakening (that will be precipitated by a very loud popping sound). While a few companies being built for acquisition will be acquired, the vast majority will ultimately run out of money and be shut down (particularly as each new Web 2.0 idea doesn’t just spawn one company but three or four)…”
But is it a bad thing? There is a good article on Forbes by Brian Caulfield called “Where Are The Web 2.0 IPOs?”. Here are some quotes from his article
“…venture capitalists say that while the boom is back, there is a fundamental change: The era of the overnight IPO, they say, is gone forever…”
“…You can get traffic overnight, and you can get a viral campaign going overnight, but that doesn’t instantly result in dollars…”
“…Instead of floating their own IPO, they hope to get hoovered up by a Web 1.0 veteran that’s already gone public…”
It became harder to go IPO these days for Web 2.0 startup. I think it is a good sign. Once your business model is working you need to be able to build value in the company before going IPO. You need time and lots of cash for that. That alone will assure existence of much stronger businesses out there. You can wake up famous these days, but you can’t wake up rich. On other side selling the company to a much stronger (financially) company will give a greater chance for your business to survive and grow because bigger companies have time and cash for that.
Web 2.0 companies bet on ad driven revenue! I’ve heard it a lot. Well, not all of them. Ad driven revenue becomes a secondary target while development of a solid business model is taking priority. Don’t get me wrong, ad revenue is a great option, especially with all new delivery channels we have now (mobile web, RSS feeds, etc.). Not to mention all of the additional possibilities Web 3.0 can bring to us such as Geoweb, Semantic Web or evolution towards 3D development (ex. Second Life). I would just not count on ads while developing my business plan. There are lots of Web 2.0 businesses out there providing B2B or B2C services assuring ad independent revenue streams.
Considering all of the mentioned above I would like to say that there is definitely a lot of value in Web 2.0 startups and much bigger percent of the companies are here to stay vs. those from the dot com bubble times. That will ensure a smooth transition from Web 2.0 era we live in to Web 3.0 future market.
Filed under: Social Concepts, Startup tips | Tagged: , 3D development, B2B, B2C, Brian Caulfield, Bubble 2.0, David Hornik, dot com bubble, Forbes, Geoweb, IPO, Second Life, Semantic Web, venture capital, Web 1.0, Web 2.0, Web 3.0 | 3 Comments »