The dot com scenario was a real crash that affected both good and bad investments.
The Web 2.0 scenario is merely a gold rush. There will be winners and losers. Winners wil not be affected by the losers.
Does anybody even know what Web 2.0 means? It's a trivial marketing buzzword. AJAX... whatever.
You make several good points, but I'm not so optimistic.
I think a 'crash' in my mind would be viewed as a scare where venture capitalists cut off investments to the sector. Such a scare would starve companies that have recieved a first round of investing but need a 2nd- meaning the seed investors would get burned. This would be really damaging because after being burned twice (~2001 and ~2007), they would be very unlikely to start investing in Internet companies for a long time to come.
But I suppose it's not all that bad- a good investment in this environment has a really good chance of earning a good return. The bad investments will earn poor returns. The only thing that bothers me about the current situation is that there seems to be quite a few 'bad investments' getting quite a bit of money.
Think about web 2.0 as a lamb of sacrifice. As well, as burned dot companies changed the face of the industries (not essence but flavour, atleast).
Garland of burning little projects showed to Sun and other companies where the exits possible to be of the hi-tech blind alley.
Think about web2.0 as tugboats of industries. They should be numerous, be alike, small, quite powerful, deft and ugly. They are useless in absence of ocean liners, but they are very helpful to pass obstacles of the time.
I'm watching for births and deaths in web market for long webyears, from puny homepages to shining monsters. Sometimes I think that all the money VCs throw in web just to give me insight in attempts to show to me, ME! - something amazing and spectacular.
Thank all the investors who brought the current state of the Web. Thank too all who opposed them.
Commentor Marc got it right.
"The Web 2.0 scenario is merely a gold rush. There will be winners and losers. Winners wil not be affected by the losers."
My problem is with the idea that "there is only room for 3 or 4 companies..." I have heard this said about so many industries that I question it whenever I hear it. You might be tempted to say there is only room for 3 or 4 search engines. I would agree (actually why do you need any more than Google?) but I cannot explain why there are HUNDREDS of web search engines.
Or, in the security space it is often said there is only room for three or four x companies. Yet there are over 80 firewall vendors, and over 20 anti-virus companies.
My explanation is that this is the "long tail" effect. There are enough reasons for differentiation based on demographics, regionality, language, etc that there is room for dozens of players even in those spaces that could be addressed by one or two.
As noted by Stiennon, "There are enough reasons for differentiation based on demographics, regionality, language, etc that there is room for dozens of players even in those spaces that could be addressed by one or two."
A very simple explanation is that those metrics people use (as in "there is only room for 3 or 4 companies..." or whatever the number is for whatever industry it is) are meant for the US MARKET. They are not meant for the GLOBAL market, which is what the Web is. The Web has about 2 billion customers. US industries, even the multi-nationals, can never have 2 billion customers. I would say the "there is only room for 3 or 4 companies..." type figures need to be upgraded by a factor of 10.
It's 1999 all over again ...
Yes, it might be cheaper to instigate a startup now than it was 7 years ago, but (imho) these companies are still making the biggest most fundamental mistake any company can ...
And if you don't know what that is, you shouldn't be in business ...
My 2 cents
There is no Web 2.0. There is no boom. There will be no bust. This entire scenario is a fiction created in the minds of reality disconnected bloggers.
No boom? Do you remember the heady days of 1999-2000? Online commerce was expected to hit $20 billion/year! Now it is over $130 Billion. ecommerce is 6 times greater than it was than.
We are still in the Internet boom. Look at these charts: http://www.goecart.com/ecommerce_solutions_facts.asp
> I think the Web 2.0 startups most likely to shut-down
> are the venture-backed ones.
The article's a bit lite on factoids, innit? Be bold, tell us who you mean - who will survive and who won't. That's real forecasting.
Yeah, I think your notion of only having 3 or 4 companies is right on for the most part. You can really only have 1 company for a specific function, but there can be a small number of similar types, each slightly differentiated to hit various niches. Taken on a global scale, this will mean more than just a few.
What doesn't make sense is many companies (such as the feed services you mention) that do basically the same thing and target the same market. Or another example is all the myspace clones that don't really offer anything different that myspace.
Thanks for the article.
Bebo.com established a larger user base in Europe than MySpace with just one round of funding.
Any company can pull the rug from underneath any other company. It's the new entrants who are often thre innovators.
"Bebo.com established a larger user base in Europe than MySpace with just one round of funding."
How can bebo.com have a larger user base than MySpace if Myspace is the second most used site on the web (Yahoo is first, Google is third)?