When Will the Web 2.0 Bubble Burst?

24 June 2007 by Mathias Meyer

Every day a load of new start-ups appears on the scene. Every day is full of announcements of new Web-2.0-like tools, platforms, and whatnot. Every day another start-up gets new funding, sometimes in ridiculous amounts. TechCrunch is full of news like that. And every day I ask myself: Haven’t I seen all this before? Before the new millennium millions, if not billions of investor and stock money went down the drain with the crash of the first wave of web start-ups. Venture capitalists invested without questioning business plans, if such a thing even existed. Personally I crashed rather soft. I was still a student, and I found a new job without any problems. I switched from new economy to old economy for a while.

But what about this new wave? What’s so different about it that big buckets of money are once again poured into sometimes questionable ideas which may or may not bring any money? What distinguishes today’s start-ups from the ones back then is the user. Without users, the content and therefore value they create, most of these start-ups aren’t worth a penny. But are some of them really worth pouring millions of dollars in them without an obvious business concept? Think about YouTube, Last.fm or the blatant German Facebook-copy StudiVZ. All of them have only one value: their users. But what can you do with that? Throw ads at them might be the obvious answer, but is that really something in the long run? A community is a brittle construct. Change something they're used to, even if it is going to help you get more money out of it, and they'll run in flocks.

I’m not sure in which direction this is going to go, but I have a weird gut feeling about the recent fundings. New start-ups also tend to look for people like they used to back then, by offering shares and working on something “new”. Even cheap labour isn’t easy to find these days, and yet a lot of start-ups pour their money into cheap and inexperienced development teams, near-shore or off-shore, only to realize later on that they screwed up and lost a big load of money. Not only does this hurt the developer market, the danger of the bursting Web 2.0 bubble will cause a lot more pain. Once again armies of unemployed web developers may find themselves walking down the street with “Will code AJAX for food” signs. I'm not very excited about that thought. Nowadays I'd crash a lot harder than back in the day.

Is that what we want? I’m thinking no. All that funding is ridiculous. I wholeheartedly agree that new ideas should have the opportunity to get out in the open, but why not start with a smaller amount? Some of the newer start-ups seem to have missed the bursting of the first web bubble which is not a bad thing, but there's always something to learn from the past. I love bringing ideas to life, but if they exist only for the purpose of getting you a nice sum of money, where's the fun in that? Hopefully they won’t witness the second bubble going up in smoke. I know I'd rather not see it happen again.

Tags: web
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