The chain of events has been well underway even long before Google’s IPO, but you can really feel the wind of a new era in web startups whooshing by. I find this an interesting time given this is the second time around for me. I was thoroughly enthralled by the first .com bubble as I worked my way through school. I was very eager to get involved and forge my own road through this exciting new era. The only problem was that as I was about to graduate, the bubble burst.
With a renewed sense of optimism, tempered by lessons learned not even six or seven years ago, I watch the renewed growth and spirit of entrepreneurship. This began with Adsense. For the first time since the burst, publishers could earn real money. That’s what really got the ball rolling. Since then we’ve seen tons of new substantial web property developments. It’s been very exciting to watch it all.
Unfortunately, I see a lot of the things that I’ve seen before. I’m still seeing websites that are striking out because they’ve got a unique idea, regardless of whether or not there’s a viable business plan there or not. That’s fine if earning money’s not your motive, but if generating revenue is at the core of your motivation, you want to be sure your business model holds water.
We still haven’t crossed the point of no return towards a burst though. Despite seemingly insane purchases going on, a lot of them are very seriously grounded in the realities of the purchasers’ business models. So long as that holds, the growth and massive buyouts are sustainable. Similarly, venture capital groups hold a lot of influence in this arena. So long as they’re riding companies hard over their business plans and going over the models with a fine tooth comb, the Web 2.0/Web 3.0 industry will hold together. The failure will come if and when people start throwing money at companies because it’s the cool thing to do. Once the lure of the next big thing is so attractive that VCs rather play the lottery rather than use their understandings of the business world, then we’ll be set for a burst again.
For now, the skies are clear and there’s lots of opportunity out there for those who have it together. For now, everyone seems to be remembering the original bubble lessons. My prediction for the future? There will be another dip, nowhere near as deep as the burst, but it will be measurable. The question of when that will happen depends on so many variables that I couldn’t even venture a guess. So when the dip does come, don’t listen to the dommsdayers who will try to convince us that this will be as bad as or worse than the .com burst. It will all come out in the wash as our industry begins the regular up and down cycles that all other industries undergo.
Sean Smith // Mar 11, 2007 at 1:53 pm
From what I can tell, advertising, via adsense and other services, is serving as a major source of revenue for a number of startups. For many of them, it allows the site to be self sustaining (like Odeo. I think this makes it easier for people to jump into the ring with their own ideas. At the very least, they end up with a portfolio piece when looking for other work. In other cases, their idea will take off, and we end up with things like YouTube or Twitter or last.fm.
This time around, hosting is cheap, and your company doesn’t even really need an office. The barrier of entry is low enough that it is an attractive option for people to try out, as long as they have a few months of savings tucked away.
Marc // Mar 17, 2007 at 10:11 am
Hey Sean, thanks for the thoughts. You got trapped in my spam filter though, sorry.
I hadn’t thought about the hosting angle. It is a lot cheaper this time around and that does help lower the entry barriers even further. While it was never that expensive to operate a smaller website the big change is in the medium websites. It’s a ton cheaper for operate a medium site. Large scale sites are still expensive, but it’s a lot easier to secure funding once you’ve proved yourself on the medium scale.