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Web 2.0 Bubble May Be Worst Burst Yet
Posted by
Zonk
on Wed Aug 01, 2007 02:19 PM
from the not-the-bubble dept.
from the not-the-bubble dept.
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?
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Phew! Thank [insert deity] for that! (Score:5, Insightful)
Good.
Simon.
Does anyone listen to him any more? (Score:4, Insightful)
From TFA:
Yeah, I keep my music CD's and software CD's in the same box as my Pets.com stock.
He's an idiot, paid by the page hit.
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Re:Does anyone listen to him any more? (Score:5, Funny)
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Re:Does anyone listen to him any more? (Score:5, Funny)
True, but be fair: the vast majority of Slashdotters aren't gonna read the article. So, no extra ad revenue for him!
(In Slashdot's defense: reading the article would be counterproductive.)
Parent
Re:Does anyone listen to him any more? (Score:5, Insightful)
Yes, it's hilarious how stupid some people are. They view his track record of outrageous predictions and conclude he's an idiot. Here's a clue, people: no one pays John C. Dvorak to make accurate predictions, so why would you judge his intelligence and success on that standard? It's like concluding your washing machine is a piece of junk because it can't keep your food cold. That's just being stupid. Judge how well your washing machine works by how well it washes things.
Dvorak is paid to generate controversy, outrage, and ultimately readership and page hits. And he's doing exactly what he's trying to do (and gets paid to do) very, very well. The fact that we're having this discussion is proof of just how good he is at his actual job.
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Re:Does anyone listen to him any more? (Score:5, Informative)
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.
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Re:Does anyone listen to him any more? (Score:5, Insightful)
CDROM encyclopedias were all the rage -- Encarta was a household name for maybe 5 years.
"Mutlimedia" was the buzzword of the period. Genearlly, it meant adding (relatively) high-res images and video clips to products that may or may not have really needed them.
In short, having your application on CD was a end in and of itself, for a few years.
Wide availability of home broadband (wikipedia replaced Encarta) and falling prices of CDs and CD drives killed the "bubble", as CD was increasingly treated as what it really was -- just another medium for storing data.
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Re:Does anyone listen to him any more? (Score:5, Informative)
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Re:Does anyone listen to him any more? (Score:5, Insightful)
An even more disturbing example is how we got investors to build the Internet fiber backbone for us... Think on this. Companies like Level 3, PSINet, GlbalCrossing, etc were darlings of Wall St analysts b/c they were (in the 90s) the "next big thing." Assuming (correctly) that the Net was THE FUTURE, Wall St boneheads seemed to assume that anyone building infrastructure for it would make off with billions.
What those dummies neglected to notice is that the fiber backbone had such huge capacity that it was way easy, almost inevitable, to "overbuild" in the sense that with virtually unlimited carrying capacity, the backbone owners/installers couldn't charge enough to cover their vast capital expenditures. (Remember, this was at the moment when Enron thought that they could develop a futures market in broadband---which turned out to be much like a futures market in seawater). The fiber-pullers in fact had no credible long-term business model beyond Wall St loving them. Once it became clear that there was no credible fat revenue stream for them, they went under, and the successor firms who bought those assets got them at a price that realistically reflected the revenue potential of the fiber. Long story short, as a nation the US got its fiber backbone on the cheap, thanks to gullible investors listening to the hype of the financial analysts. Thanks!
On the downside, those same analysts are apparently now convinced that 1. firing employees is always a good thing for a firm, even if it undermines the comapny's knowledge capital and skill base, and 2. any investment that can't be amortized in a year or less should be avoided, as should any firm that makes such investments. They are setting us up for long-term economic dry-rot, but hey, it keeps the rich happy, provided they can always find the "next big thing (©)," sufficiently hyped by the boys in suits.
So yeah, Web 2.0 might be a *financial* bubble, but like the tech boom of the 1990s, there's some very solid stuff there, and once the smoke clears and the greedy have either gotten cooked or rich, we'll just keep innovating, albeit for different employers if we're in the private sector. Wouldn't it be nice if our economy weren't held hostage by the analysts and their greedy clients? Maybe we could then live in economic security amidst innovation.
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Re:Does anyone listen to him any more? (Score:5, Funny)
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Companies come and companies go (Score:5, Insightful)
Companies come and companies go. It's a fact of life. It doesn't make them going out of business a bubble bursting.
Dvorak talks about a "CD-ROM bubble." Now, I've been around for a while, and I thought I would remember any major deflation of a market such as what happened in the dot-com bubble, but what the hell is he talking about? Ditto pad computing, I must have missed all the hype about that. I do remember word processor "wars," so to speak, but even that is questionable. As far as I recall, WordPerfect led the market for years and years, then Microsoft Word came along and cleaned its clock. Yes, there were some minor players, but seriously, when they went out of business over the years, was it really a bubble bursting? Was there really a PC clone bubble that burst? I remember two-inch thick Computer Shopper magazines with dozens and dozens of company, and over the course of time they all were either bought up or folded, but was it really a bubble bursting?
The thing that made the dot-com bubble unique was that it affected damn near every corner of the industry, even industries that had hardly anything to do with dot-coms, and seemingly all at the same time, around 2000 to 2002. Most of Dvorak's other examples were companies coming and going as they always have and always will.
As for the future, it's hard to say. There will undoubtedly be market normalization for companies that are overpriced right now, but I seriously doubt that so many people are going to be affected all at once like they were in that 2000 to 2002 timeframe.
In other words, companies will come, and companies will go. It's not major crisis, and no reason to panic.
Parent
Re:Companies come and companies go (Score:5, Insightful)
Also, unprofitable CD-ROM startups never had their stocks traded heavily by greedy, clueless retail investors. Developers lost their jobs and institutional investors lost their money but it didn't affect the general public the way the collapse of pets.com or eToys did.
Since investors have (temporarily) learned their lesson, the eventual shakeout 2.0 isn't going to affect anyone outside the industry.
Parent
Re:Companies come and companies go (Score:5, Insightful)
The dotcom bust was more about the money being invested - usually poorly. All this money was coming in and nothing was getting produced. Anyone with an idea was given cash. It was tightly linked to the WWW rush, but it wasn't exactly the same. We still have that WWW rush as we see more and more services move to the web and the first adopters start to mature - see Wikipedia and Google Maps as second generation web services versus movie rentals like Netflicks, which are a relatively new experiment. The money, on the other hand, is there but everyone is considerably more controlled about their investments. Pets.com wouldn't get investors today without a solid business model or more likely a working implementation first. This is why Google succeeded as an IPO - they were already dominating search and web advertising. Ditto MySpace being bought out and Facebook talking about going either way.
I don't see a bubble per se - I just see smarter investing and wiser hiring practices. That was the second symptom of the bubble in 2000-2002 - people with little or no experience were hired for jobs that required some level of training. There's no way you can land a job at a company now without the proper education. Even outsourcing has cooled down, outside of the politically advantaged hype that the press tend to give it. Does anyone really care that you can't have a career in a call center anymore?
Just my $0.02
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Re:Companies come and companies go (Score:5, Insightful)
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Re:Companies come and companies go (Score:5, Insightful)
I'm not sure what the medium to long term trends in advertising spending are going to be, but no one is denying that google has put together a pretty stellar business around advertising.
I wasn't aware that this sort of thing was a problem - at least if it's working out for them (which it is)
Parent
Re:Companies come and companies go (Score:5, Insightful)
I'm not sure he quite knows what he's saying, but his point could easily morph into something that makes sense.
A lot of you guys apparently lived through the dot.com bubble from the IT side. Sorry, but that wasn't really the heart of it. It wasn't just all about bad investments or companies without products. It was mostly about companies that thought they could support themselves with banner ads. The idea was you make a web site, everything on it's free, and advertisers will support it because you have a lot of viewers. This is still the model used by many successful web sites today (including this one).
Of course there were also companies like Priceline and whatever the name of that same-day delivery service was that were trying new things with actual products that didn't work out. But the majority of the dot.com bust was due to online ad revenue not growing as fast as expected and then eventually drying up. Any companies that had built themselves up expecting a big ad windfall ended up going under.
I do see the same thing happening now. The internet is being treated as one big marketing opportunity. Advertisers have come back in droves and they're all believers now. The problem is, as with anything else, there comes a point at which supply outstrips demand. That's a bubble.
Google makes its money entirely based on ads it sells. Many other sites now rely on Google AdWords themselves. (You see these "ads by Google" everywhere, from personal blogs to sites like the New York Times and CNN.) Honestly, what would happen to the net if Google's - only Google's - ad revenue collapsed? It would affect not only Google, but literally countless sites across the net. The big sites would survive at first, because they've got cash reserves and are often profitable. But they'd have to repurpose people to go out selling ad units that were previously provided to them, and they'd be doing it in a down market with a glut of supply. Smaller sites would lose their primary revenue source. Google itself would lose its only real revenue source.
You can say the same for Yahoo, MySpace or any of the big sites. They're all ad supported. If the advertisers get skittish or they find something new that they think is more effective than web advertising, then we're in for a dot.com bust all over again. And that's not even counting oversupply, which is a problem even if demand continues to be there.
Parent
This is nothing like '99 (Score:5, Informative)
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.
Parent
It was nothing to do with tech failure either (Score:5, Interesting)
Internet stock trading was suddenly made a lot easier which flooded the (previously relatively stable) stock market with a bunch of very inexperienced and irrational traders. They drove volatility and demand. Suddenly a stay-at-home mom could generate thousands a day by logging in a few times a day.
The venture capitalists supply these markets too and recognised a feeding frenzy. Float anything and it would get snapped up. This caused a boom in small start-ups created with no business plans and often no skilled staff/management. It did not matter if these start-ups would make it or not, they were just bait. Many employees of "real" companies got side-tracked into these failed start-ups wich impacted the entire industry.
Of course any such activity is not sustainable and a crash was inevitable.
So what's happening now? Well there's definitely a resurgence, but at least it appears most based on sound businesses principles. This will boom, but should not boil over.
Parent
He can't retire (Score:5, Funny)
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Re:Companies come and companies go (Score:5, Informative)
For those who missed it, the stock market took a dive in 2000, in part because the whole Y2K(Year 2000) issue ended up being uneventful, and many people who were working because companies were spending money to make sure Y2K didn't hurt them suddenly were out of a job. The other reason for the crash really deserves to be looked at.
As many are aware, the Internet came into the public eye in the 1994-1996 period. Before that, the general public was not aware of the Internet, and public access was very difficult to find, with colleges/universities being the way to get connected for the most part. By the middle of 1996, more and more non-technical people were discovering the Internet, and so the start of the bubble began. Those with business degrees started to look at the Internet as a way to make money(not to be confused with the technical people who started tech companies).
Those with a business degree and no real technical knowledge really had no business starting a high-profile tech company, but, there was hype about the Internet, and those with business degrees tend to know people who have money. So, these business people would get financing for an idea that wasn't even developed yet. For the worst offenders of the
With the initial money, these companies might go for around 2-3 years or so before the money ran out. This puts us right at the 1999 or so timeframe. What happens when you have dozens of companies, each one having gotten several millions of dollars each running out of venture money at the same time without any positive income? Suddenly the venture capitalists realized their mistakes, and they put the breaks on funding these go-nowhere fluff companies that were based on an idea but without the skills or products to allow for a payoff.
Boom, the stock market took it hard, and the
Over the 2000-2001 time period, with venture money not being available, many of the smaller companies that had products started to run into trouble. Their customer base was shrinking, and even with a good product, too many companies were going into defense mode and not spending, even on good ideas or products. This caused the larger companies like Cisco and Sun Microsystems to run into problems because they grew huge based on the demands of the smaller companies that were now dropping like flies. They were not in danger of folding, but downsizing was needed. Of course, all of these unemployed technical people suddenly could not buy the tech products, so the rest of the tech sector slowed down a lot.
The downturn in the tech sector as a whole continued through the end of 2002 into the beginning of 2003. By then, the sector had hit it's bottom and was slowly recovering. The survivors started to see a recovery in their business, but the sector as a whole STILL has yet to fully recover. The promise of what the Internet has to offer is still there, but many lenders and investors
Parent
Re:Companies come and companies go (Score:5, Interesting)
Yeah, but if it were just a problem with the way the VCs were funding things, the entire stock market wouldn't have tanked, because venture capital funds are generally regarded as relatively high-risk anyway and, in any case, a company that goes off the radar before going public has little effect on the stock market. No, there's another connection here that you didn't mention.
When a venture capitalist funds a company, it will often put its own executive management into place in order to ensure that the goals of the VC are met. The question then is: what are the goals of the VC?
Well, to make money, of course. Thanks to the internet hype during the dot-com boom, internet companies were able to go public and get some crazy money for the initial stock offering. VCs typically own the bulk of said stock, and thus VCs were able to make a lot of money off of that. Initially, the companies in question generally offered something of value, but when the VCs caught on to how easily IPOs made money for them, they started to fund pretty much any internet startup, even those without any solid business plan or any real product. Their goal was to make money as quickly as possible.
They would do this by manipulating the appearance of the company to outsiders, by forcing (via the executive management they put into place) the company itself to grow rapidly regardless of need. In those days, company growth was seen as an indicator of future success, and the VCs took advantage of that. In fact, they did so at the expense of the long-term prospects of the company, since they wanted to make their money as quickly as possible. The companies would go IPO and the VCs would make a pile of money on it.
Why did the market crash, then? Because investors eventually wised up. The companies in question went public via IPO but because they often had no real product and no real business plan they were unsustainable. Even companies that had good products and a good business plan ended up failing because their long-term financial outlook was severely compromised by their unneeded growth. And their post-IPO stock performance eventually reflected that.
Stock investors eventually caught onto the scam, and stopped buying into IPOs. IPOs as a result started failing out of the gate, and VCs started losing money as a result as well. But most importantly, the whole thing destroyed the confidence of investors in the stock market. And the market naturally crashed as a result, with all the fallout that comes of such a thing (which you described nicely).
The bottom line is that VCs are, from what I can see, primarily responsible for the dot-com crash. Some of it was the result of stupidity, but most of it was the result of willful greed.
Parent
Re:Companies come and companies go (Score:5, Insightful)
A lot of press releases are issued, pundits wonder if this hot new buzzword is the next big thing, and a bunch of investors throw money at it, hoping they'll get lucky. At the end of the day, the buzzword usually ends up not being feasible for mass production, or not really gaining consumer acceptance, or for whatever reason it doesn't become the next big thing in terms of flying off of store shelves.
The dot-com bubble was unusual in that not only were there about a zillion buzzwords, there was also some real disruptive technology going on, and this whole internet thing is a technology that's disruptive at so many levels. The evolution of the internet effected not just the tech world, not just the corporate world, not just education, not just individuals sitting at their desk at home, it was something that changed how all of those things functioned. When it crashed, lots of people looking to get rich quick found out that it wasn't all that easy, but don't pretend like we ended up back where we started. A lot of people made a lot of money, and there are plenty of companies created in that madness that not only survived, but which continue to do well. A whole industry was born in the dot-com era.
Web 2.0 has plenty of hype, no doubt, and it will likely leave the internet a more interesting place than it was before. We're not moving into some sort of post-information age now, it's pretty much just business as usual. If there's anymore hype than normal, it's only because the internet makes distributing hype much easier and cheaper than it used to be.
Parent
Re:Phew! Thank [insert deity] for that! (Score:5, Insightful)
I'm not going to carry my umbrella because I don't see anything huge floating up there completely unsupported...
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Re:Phew! Thank [insert deity] for that! (Score:5, Informative)
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.
Parent
Re:Phew! Thank [insert deity] for that! (Score:5, Insightful)
I'm just going to keep on writing and selling real software that performs actual useful functions on actual computers. This archaic process has served me well since 1985, and I see no reason to abandon it. I have these funny ideas that investors are a bad idea, and debt is a bad idea, and that you shouldn't do anything you can't actually afford to do, and that if you can't afford to do something you want to do, you should save until you can, and that if you piss on the environment, you're pissing on yourself. I know, I know, crazy, foolish, ludicrous ideas. But there is one little advantage: The only thing I notice about stock market fluctuations, "bubbles" bursting, and the Next Big Thing are sales swings in the single-digit percentile as the latest crop of BS artists gets reaped and the next crew is sown right into their still-warm shoes.
Yep, real products for real computers. Who'd a thunk it? Crazy talk!
Parent
Really (Score:5, Insightful)
The first sentence of the article and the first blatantly incorrect statement. Is it worth reading on?
It's a bit different (Score:5, Insightful)
Re:It's a bit different (Score:5, Insightful)
Parent
Re:It's a bit different (Score:5, Interesting)
Parent
Re:It's a bit different (Score:5, Interesting)
The startups still aren't making money, they still don't have business plans, they're exactly like they were in the bubble 1.0 days. Only now, instead of an IPO, you wait until Google buys you.
Parent
the stock charts are really different (Score:5, Informative)
Sure Google's stock is way up there, and the price/earnings ratio is a little foolish on some of the brand name tech stocks, but go back and look at the stock charts. This time around, there is none of the obscene spiking that sends investors into a "buying panic." And without those heights to fall from we won't have a "selling panic." So the basic mechanics of a bubble in the investment sense are missing. Investors have mostly been thinking about commodities and uranium, and are generally wary of tech stocks after the dot bomb.
--
thegirlorthecar.com [thegirlorthecar.com] - a dating game for guys
Parent
Re:It's a bit different (Score:5, Informative)
The only bubble bursting at the moment is the subprime and alt-a real estate bubble. This will effect all aspects of the economy, including the tech sector. However, that is not the same as the web 2.0 bubble bursting.
Nothing to see here, move along. And for the record, I didn't RTFA, clicking on Dvorak links only encourages him to write more useless drivel.
Parent
I dont believe so. (Score:5, Interesting)
Venture Capital Firms' Spending (Score:5, Insightful)
Re:Venture Capital Firms' Spending (Score:4, Insightful)
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Re:Venture Capital Firms' Spending (Score:5, Insightful)
A real bubble exploding in my view is just a massive transfer of money from one market (or segment) to another. Am I wrong if so what is the reality of the situation?
Parent
Re:Venture Capital Firms' Spending (Score:5, Insightful)
More of the money was not really lost, because it wasn't really there in the first place. People were 'paper millionaires.' They put time and effort into a start-up, and were rewarded with shares on top of their salary. These shot up to being worth millions. They kept them, assuming future growth, but then the market crashed and they had a load of paper. On paper, they lost a lot, but in practice the fact that they didn't have a job anymore because their company had folded was likely to have a bigger impact on their life.
Some in the second category might have borrowed money against the shares and spent it on shiny toys. When the shares collapsed, the shiny toy (car, boat, etc) sellers kept the money, and they went into debt. Another extension of this is people who supplied things to the start-ups. Take a look at Herman Miller's stock price from 1995-2000; it shot up. Every start up was buying Aeron chairs at $700 each. They weren't badly affected by the burst, because they still had all the money that had been spent on chairs and were able to re-focus their market. Sun was another one that did well during the boom era. Everyone needed web servers, and Sun were selling them. They didn't do so will in the immediate aftermath, but are picking up again now.
Take a look at any company that sells things that start-ups buy in large quantities, and you'll get a good idea of where the real money went. The paper money mostly went to the investors savvy or lucky enough to cash out early.
Parent
FUD? (Score:5, Insightful)
It could happen. It may even happen. But acting like a mother and predicting every possible failure or catastrophe that can happen and when one of them does saying "Look I was right" only works on kids.
Dvorak should be ignored.. (Score:5, Insightful)
Laughable.
Obviously the economy isn't doing too bad (Score:5, Informative)
Every Dvorak article is more moronic than the last (Score:5, Insightful)
This isn't 1999, where a twentysomething with a web site could land millions of dollars of funding for a web site whose biggest feature was that it was on the web, and then get put in charge of the company, spend the money on Aeron chairs and foozball tables, and run the company into the ground.
Maybe but not as bad (Score:4, Insightful)
Where are all the vaporware companies? (Score:4, Insightful)
In 1999, how many companies were there that were publicly traded, had market capitalizations in the billions, and had never made a dime? How many Supwer Bowl ads were there in 1999 for massively unprofitable companies?
Contrast that with the current situation. There is probably some degree of overspeculation, particularly in the housing market, and this will take some time to correct. But to see a massive crash of companies built up by VC pump-n-dump...no. That's not to say there can't be a crash, but it won't be for the same reason as 1999.
Except that we don't seem to have one (Score:5, Insightful)
The problem was people were just throwing their money in to startups that had no fucking clue what they were doing. Many were offering something totally worthless (Cuecat), many had no plans for how they'd actually make any money since their whole business was giving shit away for free, many just pissed money away on parties and such.
Well I don't see that happening right now. Maybe it is and I've just missed it, but I do kind of keep an ear on these sort of things. If people have been unreasonably throwing money in to anything it has been housing, and at least that's a market where you are purchasing a real property with real value (though that doesn't mean you can't overpay). Sure there's still investment in online technology but that doesn't make it a bubble of any sort. There are plenty of successful online businesses. Google is a great example. While their stock is surely overvalued, there is no question that they are a profitable company and face no danger of going out of business should it drop. They are propped up by a solid positive cash flow, not a stock bubble.
I don't claim to be an economist or anything, but I really am missing the
is this a joke? (Score:5, Insightful)
In the bubble, investors were buying shares with very high prices despite very little earnings. The Nasdaq currently has an average P/E 24.01, which is reasonable if some companies are mature and some are in a high-growth state.
And... since when was Dvorak a market analyst? I thought he was just a troll who posted absurd comments in order to draw readers...
What bubble? (Score:5, Insightful)
A lot of what he talks about in the article is copy-catting. Youtube is extremely popular, thus a lot of other copy-cat video sites are popping up, often targeting more specific markets that are less social in nature. Social networking and user-generated content is pretty much the same thing. When people get tired of it they will stop doing it. Big deal.
I really don't understand what bubble he's talking about that is going to burst. The sites that comprise the internet will come and go and change according to traffic. Just as fads, hair length and clothing styles come and go, so will various movements on the internet as it matures.
Dan East
Dvorak Says... (Score:5, Funny)
What bubble? (Score:5, Insightful)
So what does Dvorak say?
Neo-social networking. Today everything from YouTube to the local church has a social-networking angle. And this doesn't even consider the actual social-networking sites, from MySpace to LinkedIn to Facebook to even Second Life. This scene is totally out of control and will contribute to the collapse for sure.
So, here's Dvorak's bubble of over-valued assets:
MySpace = fox
Facebook - privately owned
Youtube = google
Google
iPhone = apple
Or in other words, the best examples Dvorak has of the bubble of the late 90s repeating itself are:
Fox
Google
Apple
Facebook
Personally I don't agree with Dvorak's assessment that these companies are about to collapse (although it seems unlikely anyone would pay $2 billion for facebook).
Just my $0.02.
Yes, there's a bubble, but it's not a big deal. (Score:5, Insightful)
Yes, the "Web 2.0" bubble will pop, but nobody will notice.
I did Downside [downside.com], and I have a good track record predicting Web 1.0 failures. Last time around, we had way too much capital going into bad ideas. "Web 2.0" companies aren't that capital intensive, and most of them aren't publicly held early stage companies. If that sector collapses, it will be a blip.
That said, we're seeing some high P/E ratios. Google's is 44, and Yahoo's is 45. Those are high but not insane. Reasonable values for a big, successful company are in the 10-20 range. (Microsoft is 21, IBM is 17, Boeing is 23, AT&T is 20, News Corp is 21.) It's not like last time, when we were seeing P/E ratios above 100. Some of that history is at Downside's Deathwatch. [downside.com] ("Chart is not available for this symbol" means the company is so dead their ticker symbol is ancient history.)
As an investor, I'm much more worried about housing and energy issues. Oil is at $77/bbl today. That has much more impact than anything in the web area. The US housing bubble is deflating, foreclosures are way up, too many adjustable-rate borrowers are being squeezed by rising interest rates, and it's not clear who holds all the paper collateralized by mortgages. Parts of the financial services sector will be squeezed hard by that. Those issues are 2-3 orders of magnitude bigger than "Web 2.0".
Re:Is... (Score:5, Funny)
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