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Web 2.0 Bubble May Be Worst Burst Yet
athloi writes with a link to an editorial by John Dvorak over at the PC Magazine site. Rather than his usual tilting at windmills, Dvorak turns his attention to possibility of another big internet economy 'pop': "Every single person working in the media today who experienced the dot-com bubble in 1999 to 2000 believes that we are going through the exact same process and can expect the exact same results — a bust. It's déjà vu all over again. Each succeeding bubble has been worse than its predecessor. Thus nobody is actually able to spot the cycle, since it just looks like a continuum. I can assure you that after this next collapse, nobody will think of the dot-com bubble as anything other than a prelude." It certainly seems like another burst is imminent; will this one be worse than the original, or have less of an impact?
By CD-ROM, I think he means the "interactive", "multimedia" "games"/apps/"experiences" of the mid-90s, hailed by certain powers-that-be as the things that would get us to run out and buy CD-ROM drives in droves. The full screen genre preludes to Flash (in fact, a great deal were made with Shockwave) that never were useful.
I can't say whether it was a bubble or not, but I know I'm glad no one, except for perhaps some cell phone/PDA software autorun presentations, still uphold that particular art form. With this in mind, he's not all full of crap.
As for the industry going towards more or fewer bubbles, I have no idea. On one hand, the industry is stabilizing and maturing (if by "maturing" you mean "big companies can upsell other big companies on ridiculous systems no one needs") so more and more jobs are guaranteed. On the other hand, there's still technical evolution and still wrong-headed venture capital, so there will always be costly software projects that fail (and software projects *do fail*, more than half of them, regularly). On the gripping hand, there are people who know way more about this industry than I do and even they can't say which way it'll go.
The thing that made the dot-com bubble unique was that it affected damn near every corner of the industry
It was insane. Unsustainable valuations that reminded me more of tulip bulb trading. Companies with absolutely no background in tech were opening up IT consulting branches. Yes, I'm looking at you KPM&G.
If anything what we're currently experiencing is a correction from an industry that was over-sold in the wake of the dot-com collapse in 2000 and then the outsourcing insanity that followed after. That was a double whammy that dried up the pipeline of IT students in college almost overnight.
It doesn't feel like tulip bulb trading this time. This is a correction and we're still playing catch up.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
He is completely clueless. The dot com bubble has very little to do with markets disappearing or businesses failing. The bubble was all about people that would blindly invest in internet stocks and businesses. After awhile when the overvalued internet companies started to fail, and all that stock was worthless, it caused an impact on the economy. CDROM based interactive multimedia didn't do that, they never had the investment that the dot coms did. I believe currently people are more wary of investing in unproven web businesses and you really need to have an environment where people will blindly invest in companies that think they are going to make money shipping 50 pound bags of dog food to the people. The current bubble that might hurt is the mortgage fiasco that is currently playing out right now.
Amen to that..
I made a fair chunk of change between 1998 and 2001, writing back-end code for companies that wanted to put some kind of service online. Trust me, the idiocy level back then was staggering. A friend and I used to say, "y'know, we could start a business that sells dollar bills for 95 cents each, and have a better business model than most of the startups out there."
The last dotcom boom was fueled by people who misunderstood the notion of branding. In practice, a brand is the reputation consumers associate with your company's name and/or logo. Apple, for instance, has a strong brand because lots of people have had good experiences with Macs and iPods, and the strength of that brand has generated lots of interest in the iPhone. Microsoft has a strong brand in the workplace, because everyone knows that MS products have been standard for the past decade or so. Both of those brands are based on people's experiences with actual products, though.
Back around 1998, marketers honestly thought the products were irrelevant. They thought the 'brand' was simply public awareness of the company name and logo. They thought you could slide products and services -- even whole business models -- in and out under that 'brand', and consumers would simply adapt to whatever was there at the moment.
They also believed in first-mover advantage.. bigtime. According to the guys in expensive suits, the first dozen or so companies who managed to establish their reputationless 'brands' would have all the time they needed to shove an actual business in under the logo. Everyone else would die because the winning 'brands' would suck up all the available customers.
So the whole dotcom bubble became a race to the peak of stupidity, and the winner (IMO) was a company that blew something like 80% of its venture funding on a single Superbowl ad that never even mentioned the company name or URL. Among the honorable (sic) mentions were boo.com and petsmart.com.
Basically, during the dotcom bubble v1.0, everyone was trying to imitate Amazon.com, which went from nothing to being one of the strongest brands in the country almost overnight. People didn't realize -- or more specifically, didn't care -- that Amazon's brand was held up by a solid reputation for good customer experiences, or that Amazon did have a business plan that led to profitability a few years down the road.
Today, everyone's trying to imitate Google, which is more or less leading the way in using the web browser as a software platform. For Google, it's just an exercise in wholesale data collection. Data allows Google to improve its search service, and the search service is a vector to sell ad impressions. Nobody else has a business model which generates profits directly from putting software-as-a-service up for use by the general public, but that doesn't stop people from trying to aggregate users with web-based software. The god news is that we have actual products these days, and that the funding is going to companies who've developed good brands based on actual user experience with the product.
The bad news is that places like twitter.com will eventually find themselves looking for enough revenue to support the millions of people who love the stuff they can get for free. It's almost inevitable that some of them will collapse. But that doesn't make this a bigger and more financially irresponsible bubble than dotcom v1.0.
I spent 1998 to 2001 walking around shaking my head at the stupidity of web ventures that could rake in tens of millions of dollars in funding, and hearing about stupider and more expensive ones every week. I'm not doing that these days. I still say, "nice service.. but I don't see how they're going to make money," every now and then, but we aren't in the middle of a balls-out silly season like we were back then.