Is 'Web 2.0' Another Bubble?

Carl Bialik from WSJ writes "Two tech VCs, Todd Dagres and David Hornik, debate whether there is a bubble in so-called Web 2.0 companies looking to cash in on a resurgent online ad market. In the WSJ.com debate, Hornik writes: 'Venture capitalists will rationally stop investing in ideas that don't bear fruit. Those that do bear fruit will gain traction and either be acquired or go public. Those are the traits of a rational market in my mind.' Dagres responds: 'I think the Web 2.0 space will have a higher mortality rate than other segments of the overall media and technology industries. There are far too many MySpace and YouTube genetically challenged clones. All but a few will fail. The winners are generally the ones that get in early and out before the bubble bursts. There are rare examples of bubble companies making it through the bust and going on to become successful and valuable companies. By the way, the combined cash flow of Spot Runner, LinkedIn and Facebook is less than that of one Costco store.'"

Comments

Re:Web 2.0 Url Please

[Giometrix]

"Well then, whats so new and cool about Web 2.0? I've been using slashdot way before they coined the phrase."

Some businessmen somewhere realized that they can use "community produced content" to drive their sites rather than having to pay for writers and editors to produce content.

Our boss just gave us the "we will move toward web 2.0" speech in our "year and review" meeting. Free, up-to-date content (via forums) was the reasons he gave for moving toward "web 2.0".

That's all fine and dandy. Except that achieving a GOOD community driven site is not easy. You really need to reach a critical mass of users before your site's community will generate good, useful content that will attract more readers (and thus grow your community, and ad dollars). Would slashdot be as appealing to you if the community was only a handful of people? The news comes late, and you don't even get the whole story. The whole reason you come here is for the community's feedback to the stories. Most sites don't achieve anywhere close to this level of success, and their forums lie dormant with at most a couple of posts.

Eventually managers will realize that the promise of free "web 2.0" content is not as easy to achieve as they thought, and the pendulum will swing back toward "web 1.0."