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The Internet Businesses The Almighty Buck

Web 2.0 Bubble May Be Worst Burst Yet 417

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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Web 2.0 Bubble May Be Worst Burst Yet

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  • by Space cowboy ( 13680 ) * on Wednesday August 01, 2007 @03:21PM (#20075899) Journal
    Dvorak is crying that the sky is falling; so, based on his track record, everything must be just peachy then.

    Good.

    Simon.
  • Really (Score:5, Insightful)

    by MyLongNickName ( 822545 ) on Wednesday August 01, 2007 @03:22PM (#20075911) Journal
    "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."

    The first sentence of the article and the first blatantly incorrect statement. Is it worth reading on?
  • by Aslan72 ( 647654 ) <psjuvin@ilstu.STRAWedu minus berry> on Wednesday August 01, 2007 @03:23PM (#20075919)
    People get giddy with their money and spend it foolishly, yes; however, this time around I think it's a bit different. People within the top tier of sites are actually making money, creating business plans, etc. Services that are offered are actually useful and when they aren't, they get eaten.
  • by hansoloaf ( 668609 ) <hansoloaf@[ ]oo.com ['yah' in gap]> on Wednesday August 01, 2007 @03:23PM (#20075925)
    I would look into this - is it as crazy as it was back then? I don't see many IPO's with paper millionairs appearing overnight and going bust just as fast. Nor I see many massive hiring of naive and unskilled workers with inflated salaries. I'm sure the latter is still happening but I don't see it on the scale we saw in the 90's. So if there's a bust - I don't think it'll have a big impact as it did back then. I could be wrong though.
  • FUD? (Score:5, Insightful)

    by Kazrath ( 822492 ) on Wednesday August 01, 2007 @03:24PM (#20075949)
    Shouldn't this article be linked under FUD in wikipedia?

    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.

  • by TechyImmigrant ( 175943 ) * on Wednesday August 01, 2007 @03:24PM (#20075959) Homepage Journal
    He's taking a whole load of independent businesses that happen to use more modern web protocols and formats (because they can) and using the common element of the web protocols they use to label it a bubble.

    Laughable.
  • by boguslinks ( 1117203 ) on Wednesday August 01, 2007 @03:24PM (#20075963)
    We may have a certain percentage of Web 2.0 companies tanking soon, but we have not had a stock market run-up like in 1999-2000. So no, the impact of a forthcoming "burst" won't be nearly as bad.
  • by IGnatius T Foobar ( 4328 ) on Wednesday August 01, 2007 @03:26PM (#20076003) Homepage Journal
    There have been many lessons learned since the last bubble. This time around, investors want to see real business plans, and there's got to be a plausible way of actually making some money. Perhaps more importantly, they're putting actual business-savvy people in charge this time around.

    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.
  • by Datasage ( 214357 ) <Datasage AT theworldisgrey DOT com> on Wednesday August 01, 2007 @03:26PM (#20076015) Homepage Journal
    I think some companies in this current era of the web are a bit over valued. (Google in particular comes to mind) Its likely that at some point, the market will correct that. But in general, companies are much more stable and substantive than they were in the late 90's.
  • by khasim ( 1285 ) <brandioch.conner@gmail.com> on Wednesday August 01, 2007 @03:27PM (#20076025)
    He's a clueless idiot who just trolls for page hits.
    From TFA:

    We saw all sorts of bubbles before the dot-com one. For instance, there was the CD-ROM bubble. Remember all the CD-ROM companies? Bill Gates's "Information at Your Fingertips" was the watchword. Microsoft itself started a unique division called Microsoft Home. The whole scene collapsed almost overnight.

    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.
  • by Mr. Underbridge ( 666784 ) on Wednesday August 01, 2007 @03:29PM (#20076045)

    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.

  • No, you're not wrong. The writer of the article doesn't seem to understand what causes "bubbles" and what the real impact is when they burst. What made the 99-00 "bubble" burst so dramatic was due mostly in part that lots of people lost lots of money. If "the next big thing" pops, people will lose money but it won't be nearly as bad.

  • What's to worry? (Score:2, Insightful)

    by taskiss ( 94652 ) on Wednesday August 01, 2007 @03:29PM (#20076055)
    I'll worry when a sock puppet hawks pet food on a superbowl commercial or when some company tries to create a business model around delivering groceries to consumers from a van.
  • by CdBee ( 742846 ) on Wednesday August 01, 2007 @03:30PM (#20076063)
    It's also different in that probably half as many people again are "online" than 7 years ago, the technology is much better and the kind of interaction the original Web bubble required can be implemented without click-and-load HTML-only interfaces.... and more to the point, the business sector seems to have a far better insight into what business plans sell and what services are desirable
  • by Sycraft-fu ( 314770 ) on Wednesday August 01, 2007 @03:31PM (#20076071)
    The first .com thing was called a bubble by many economists and business people from the get go and it clearly was. I remember my roommate (who was a business major) joking about how we should start a business. We'd have no business plan and no way to make money, offering something worthless. We'd lose a ton of money first quarter and just cut costs every quarter after that. Stock prices shoot up on the "growth" (less loss was huge growth for .coms) and we get out like madmen, well, minus the whole securities fraud thing.

    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 .com bubble if there is one. If I was to pick something to be concerned about it would be the real estate market as there as a good number of ARM mortgages that are going to be resetting in rate here soon and values in most areas are not rising much if at all.
  • is this a joke? (Score:5, Insightful)

    by Lord Ender ( 156273 ) on Wednesday August 01, 2007 @03:31PM (#20076073) Homepage
    Stock bubbles are the result of speculation. Speculation is when people buy companies with incredibly high SharePrice/EarningsPerShare (P/E) ratios. For a mature company, this number is typically around 15, meaning if earnings stay the same, and all earnings are paid as dividends, over a 15 year period, you would not lose money even if the share price went to 0. For expanding companies, P/Es can typically be as high as 40.

    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...
  • Problem (Score:3, Insightful)

    by Senjutsu ( 614542 ) on Wednesday August 01, 2007 @03:32PM (#20076089)
    In order for the bubble to burst, you have to have a price bubble in the first place. Whither the inflated Web 2.0 company stock values? Most of them haven't even IPO'd because of SarBox. Venture capitalists pissing their money away on craptacular Web 2.0 companies isn't the same thing as the inflated stock pricing on Internet companies and the resulting massive correction afterwards.
  • by KingSkippus ( 799657 ) * on Wednesday August 01, 2007 @03:33PM (#20076099) Homepage Journal

    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.

  • by CyberGarp ( 242942 ) <`gro.ttebraG' `ta' `nwahS'> on Wednesday August 01, 2007 @03:33PM (#20076101) Homepage
    His evidence list is a joke. First off if the social networking sites collapse, how bad will that be for the industry? Secondly, if the you-tube clones fail, how bad will that be? The rest of the evidence is really not much about collapse, just a bunch of bitches about likely project failures. The quote "the iPhone mania may be a bad sign of something" is priceless.

    Summary:

    John vents his spleen in a rambling manner, inflates the headline to something about industry collapse and slashdot reports it as news.
  • What bubble? (Score:5, Insightful)

    by Dan East ( 318230 ) on Wednesday August 01, 2007 @03:35PM (#20076149) Journal
    IMO, Web 1.0 was about what was on the internet (grocery shopping online, etc), Web 2.0 is about how things are on the internet (ie AJAX). Web 2.0 is primarily a maturing of what we already have. It's the result of bandwidth for the masses, new browser features due to the rejuvenation (thanks to Mozilla) of a stale market (thanks to Microsoft), PCs with lots of CPU cycles and RAM to spare, high resolution displays, and the fact that such a large percentage of society is online.

    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
  • by jshriverWVU ( 810740 ) on Wednesday August 01, 2007 @03:45PM (#20076289)
    Something I've always wondered. It's common knowledge, the .com burst "lost a lot of people money". But money doesnt go away, it just shifts. I wonder who really profited from the bubble. If someone owns a bunch of overvalued stock and sells it, then it tanks and the owns "lost everything" the person originally selling it still made a lot of money. Same with businesses, I'm sure a lot of money was spend on buildings, hardware, whatever so the people selling those must have made a lot of money.

    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?

  • by Otter ( 3800 ) on Wednesday August 01, 2007 @03:46PM (#20076301) Journal
    The thing that made the dot-com bubble unique was that it affected damn near every corner of the industry...

    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.

  • What bubble? (Score:5, Insightful)

    by Mike1024 ( 184871 ) on Wednesday August 01, 2007 @03:52PM (#20076397)
    It was always my understanding that for a 'bubble' to 'burst' there has to be a market full of overvalued assets. For example, people valuing pet food delivery companies at millions of dollars. I'm not sure what particular overvalued assets this bubble is made of.

    So what does Dvorak say?

    The current bubble, already called Bubble 2.0 to mock the Web 2.0 moniker, is harder to pin down insofar as a primary destructive theme is concerned. A number of unique initiatives, however, are in play here. Let's look at a few of the top ideas floating the new bubble.

    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.
    MySpace was purchased by fox for a somewhat excessive sum, but that's already happened. Facebook's owners reportedly want two billion dollars for the company, but no-one has paid them that. So from this category I see one company, facebook, and it isn't even publicly traded.

    Video mania. With dozens and dozens of YouTube clones cropping up to get on the "throw money away" bandwagon, you must sense that the eventual shakeout in this space will have a negative impact.
    Youtube was a rather expensive purchase for Google and it's hard to see where the payback is, but that's already happened. I can't really think of any competitors anyone is likely to invest in... google video, perhaps, but that's owned by Google anyway.

    User-generated content. This idea has been around since Usenet and just keeps improving. It will make no contribution to the overall collapse except for users reporting the collapse.
    "This part of the bubble is not part of the bubble"??

    Mobile everything. Here is another concept that has been in play since the mid-1990s. It cannot trigger a collapse since it will never fully get off the ground, although the iPhone mania may be a bad sign of something.
    Mobile what? Are mobile phones a bubble? Or is there a bubble of iPhones and iPhone-like-devices that I'm not aware of?

    Ad-leveraged search. Most search engines will fail as a matter of course. This segment of the industry is mundane. It would be affected by a crash but not trigger one.
    You mean Google?

    Widgets and toolbars. I cannot see the widget scene going crazy, and the jury is still out on toolbars. But there is the potential for nuttiness, I think. The problem here is that these things tend to be dependent on the stability of operating systems and browsers. One bad operating-system patch and suddenly nothing works.
    There's a "widget and toolbar" bubble? I don't know of any company built around selling "widgets and toolbars".

    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.
  • by fistfullast33l ( 819270 ) on Wednesday August 01, 2007 @03:53PM (#20076407) Homepage Journal
    I agree with most of what you said. It seems as though Dvorak is mistaking the dot com bubble with the market trends that occurred around the same time. Take CDRoms and the WWW explosion - both resulted in rushes to put anything you could on that medium. Cookbooks, encyclopedias, maps - they all ended up rushing towards whatever medium was the hot topic of the moment. I seem to remember the movie Disclosure having some premise regarding a CDROM virtual world or whatever - it didn't make sense.

    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
  • by T_ConX ( 783573 ) on Wednesday August 01, 2007 @04:01PM (#20076535)
    Remember the last time the bubble burst? Remember how all those crappy sites like Pets.com died, and how those overly optimistic .com start ups crash-and-burned because they didn't have a business model beyond 'lets just do what Amazon does'?

    Remember how all the GOOD sites managed to survive, like... oh I don't know... Slashdot?

    Now imagine all those crappy mySpace/Facebook imitation websites burning to the ground, all (or most of) those Digg-clone'Social Bookmarking' sites biting the dust, and all those YouTube wannabe's going bankrupt.

    It's going to be awesome... until the dust settles and we start hearing people say 'Web 3.0' over and over again, thinking that there is NO WAY this Web bubble is going to burst like the last two!
  • Face it, predicting another dotBoom over the internet these days is about as silly as predicting another dotBoom over the CD-ROM. It's so ubiquitious that the growth isn't there in the sense that excites Wall Street.

    There's not even Web 2.0 spike to begin with.... people building web apps are going to maybe use Web 2.0 or maybe not. The previous web boom was more about putting money into internet companies that were building out for the first time. This is a much more evolutionary technology.

    For that matter, there's not even an all out browser war any more, just a gradual increase in the use of FireFox that only engages Microsoft's attention to throw tabs onto IE6 and call it IE7. Back in the Netscape day, Gates and Co were so po'd they made a really groundbreaking browser from a DOM scripting standpoint in IE4... and they spent a few good shillings to do so. Now, what do we get, tabs? Microsoft is too busy building x-boxes and table computers to care about PCs any more and even Vista is anti-climatic.

  • Hmm... (Score:2, Insightful)

    by VorpalEdge ( 967279 ) on Wednesday August 01, 2007 @04:06PM (#20076617)
    If it gets people to stop saying Web 2.0, I'm all for it.
  • by TheRaven64 ( 641858 ) on Wednesday August 01, 2007 @04:08PM (#20076675) Journal
    A lot of the money went to the venture capitalists who invested early on. Put money in a company in exchange for a share, wait for the IPO, hype it until it's over-valued by an order of magnitude or so, then sell. It doesn't matter if the company goes anywhere, as long as you can palm it off on someone before anyone notices.

    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.

  • by juuri ( 7678 ) on Wednesday August 01, 2007 @04:09PM (#20076689) Homepage
    I was in SF then and am in SF now where there are quite a number of startups. If this is what the media really believes then they have no idea how crazy the dot.com bubble really was. It was a gold rush of epic proportions, people really did make 80k a year for knowing basic HTML. If you could string two sentences together and work Word you could be a project manager. If you knew three layers of the OSI and how to run tracert, you could be fast tracked to being an admin. Companies were desperate for people because everyone believe you had to ramp up customers *and* employees as fast as possible regardless of profitability.

    The companies around now all have some veterans of the crash. What I see are people who are frugal, want to stay small, and aren't out to IPO as fast as possible. Many of these companies are trying to make their series A last as long as possible. During the boom companies were planning how to spend series C before even closing B... it was crazy, fun, exciting and a total disaster.

    Here's a benchmark for how crazy SF was. Pretty much every company would reimburse most lunch and almost any taxi ride if you could come up with some loose business connection. There was such a wait for taxis downtown and SOMA that limo drivers from all over the bay would do extra day hours with a whole booklet of receipts from major taxi companies. You could take a limo pretty much anywhere in town for $10 flat with tip, $20 if it involved multiple stops or a short wait anywhere. This lead to you seeing kids fresh out of college, popping in and out of limos having $140 lunches at Aqua and such because it all came so easy. Everyone know it was a farce and was going to end soon (well everyone without an MBA or people who moved into town specifically for one of these crazy pie dreams). If I had to do it all over again, I would, because it was a fabulously good time on dumb people's money.

  • Wrong Industry (Score:4, Insightful)

    by tansey ( 238786 ) on Wednesday August 01, 2007 @04:13PM (#20076739) Journal
    I think the media is focused on the wrong industry. Most people here would agree that internet-based companies today are much more solid and the sky isn't about to fall on the IT industry like it did earlier in the decade.

    However, I do think there's a bust over the horizon, but just in another industry: entertainment. Think about the millions of dollars spent on producing video games, movies, and music. I'd argue that a push is happening among consumers away from expensive graphics-intense games (Nintendo Wii's success and PS 3's stumble), special effects-intense films (movies like Spiderman 3 are seeing rising production costs with falling profit margins), and one-hit-wonder artists' albums (iTunes' success is mostly due to the ability to purchase single tracks).

    So what I would imagine we'll see in a few years isn't another IT-industry bust, but an entertainment-industry bust. When production costs start to creep really close to product sales, the industry is going to go nuts. This isn't a bad thing though. Just like the dot-com bust forced companies to stop rehashing ideas with a new face, an entertainment bust would force companies to actually produce novel content rather than making sequel after sequel.
  • by cowscows ( 103644 ) on Wednesday August 01, 2007 @04:19PM (#20076879) Journal
    Devorak is confusing buzzwords with a bizarre economic fluke. Every time there's a new, potentially disruptive technology on the horizon, we get a bunch of the big players talking about how it's going to be a revolution, and a bunch of smaller companies come out of nowhere looking like they might be able to take advantage of this new thing to outmaneuver the entrenched giants.

    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.

  • by cbreaker ( 561297 ) on Wednesday August 01, 2007 @04:21PM (#20076903) Journal
    It's all good for IT workers, I think. I mean, after the whole collapse of the stupid .com companies, there was an absolutely saturated market of IT workers with no jobs.

    Most of them weren't very good at working with computers. They got into the field because the jobs were plentiful and the salaries were very good. If you'd used a computer, or passed a couple Microsoft certs, you'd land at least 65K.

    So therein lies the problem with people that actually enjoy computing and IT, enjoy learning it, and enjoy implementing it. I like my job. It's interesting and I get paid well for it. But it took several years of competing with crappy know-nothing IT workers for a position. It doesn't matter how much better your resume is then anyone else's; when there's 800 resumes submit, your changes are low.

    I hope that the trend continues upwards; weeding out the bad IT workers and creating more demand for people that are good at what we do.
  • by hedwards ( 940851 ) on Wednesday August 01, 2007 @04:28PM (#20077007)

    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 agree with your basic thinking but disagree with your conclusion. Just like during the .com boom and subsequent bust, right now we have businesses like Amazon.com and Netflix with business models, but we also have businesses like Google which have no discernible business plan besides making money. If you look at Google, yes they are raking in the money, but only for so long. Just like Walmart, the competition isn't standing still, and if Google doesn't get a coherent business plan it is going to be painful.

    What I mean is that there is no particular rhyme or reason behind the services that Google brings online, they don't appear to be a part of a corporate strategy. Some of the acquisitions such as Youtube are worse, without any particular promise of income and huge liabilities. Google has a huge advantage over most of the previous .coms in that it has huge a cash flow and plenty of talent. But it will ultimately need a coherent strategy if it is to succeed when there is viable competition.

    I definitely don't want to suggest that they can't do it, but the share price is absolutely ridiculous. Companies trading at this sort of a price don't remain there permanently. Google is really overpriced. The profits just aren't good enough for the pricing. MS is trading at about half that when things are adjusted out and it is a much better business in terms of efficiency and profit. Just like during the .com era, there are good companies and bad companies and some which are good, but overpriced. And if you look at what happened to MS during the last .com boom, the share price took a real hit, even though they are still in business today.

    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
    This seems just right to me. The requirements in terms of hiring are much better than they were previously. And I think you are correct on this one.

    But this bubble has more to do with people investing in stupid ideas and the acquisition of businesses like Youtube which don't have a business model, are hemorrhaging money and don't necessarily have a competitive edge beyond popularity. And that doesn't help online, where it is possible to move from site to site with significantly more ease than one can in the real world.
  • by Junks Jerzey ( 54586 ) on Wednesday August 01, 2007 @04:33PM (#20077095)
    ...that web 2.0 companies are making money. They're not just airy fairy exercises in giving everything away forever. Flickr sold pro-accounts, for example, and huge numbers of people bought them even before Yahoo acquired the company. I bought one, and got much enjoyment out of it.

    There are some oddities out there that get lots of press for no discernible reason (twitter comes to mind), but most of the so-called 2.0 companies are solid companies with ways of generating revenue.
  • by Animats ( 122034 ) on Wednesday August 01, 2007 @04:37PM (#20077147) Homepage

    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".

  • by protohiro1 ( 590732 ) on Wednesday August 01, 2007 @04:48PM (#20077325) Homepage Journal
    I think there is a small bubble, but for the most part it isn't a stock bubble, its a VC bubble. Right now in Silicon Valley VCs are falling all over themselves trying to fund some little crappy startup and hoping it will be the next company to flip for a billion dollar acquisition. I suspect that Yahoo is not going to be making many billion dollar startup acquisitions for the foreseeable future and Google is heading for a correction that will probably put a stop to the frenzy as well. And then, sadly, the VC is going to dry up and any web 2.0 startup that can't make money is going to close. Its the silicon valley cycle of life. The .com bubble was an extreme example, but what goes up must come down. I just hope that I can stay afloat through the next downturn.
  • by AndersOSU ( 873247 ) on Wednesday August 01, 2007 @04:48PM (#20077335)
    If google crashes it won't because of their esoteric apps aren't bringing in money, it will be because advertising dries up.

    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.

    Google which have no discernible business plan besides making money.

    I wasn't aware that this sort of thing was a problem - at least if it's working out for them (which it is)
  • by Gription ( 1006467 ) on Wednesday August 01, 2007 @05:05PM (#20077573)
    I don't see the endless wave of venture capital buoying up a false economy. I sure things can go down but there isn't the huge percentage of businesses that exist on nothing except expensive pipe dreams, hopes of traffic revenue, and continuous injection of capitol from investors instead of commerce.

    I'm not going to carry my umbrella because I don't see anything huge floating up there completely unsupported...
  • by merreborn ( 853723 ) on Wednesday August 01, 2007 @05:13PM (#20077695) Journal
    To give those who may not remember a bit more of an idea of what the "CDROM bubble" was like (not that I think that's really a good name for it), in the mid nineties, "CDROM games" were their own category in stores -- you had action games, strategy games, puzzle games, and CDROM games. As if the media a game shipped on somehow defined it.

    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.
  • by P3NIS_CLEAVER ( 860022 ) on Wednesday August 01, 2007 @05:15PM (#20077713) Journal
    I would be worried if my mom or a cab driver was talking about 'web 2.0', but hardly anyone in our technical group ever mentions it (the cab driver and mom have no idea what it is).

    Yes, we talk about ajax but that's about it.
  • by badasscat ( 563442 ) <basscadet75@NOspAm.yahoo.com> on Wednesday August 01, 2007 @05:28PM (#20077903)
    That may all be true, but you're not equating one overvalued company with a market-wide "bubble" are you? Or are you saying Google is typical of IT companies right now?

    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.
  • by osu-neko ( 2604 ) on Wednesday August 01, 2007 @05:51PM (#20078169)

    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.

  • by sulfur_lad ( 964486 ) on Wednesday August 01, 2007 @06:11PM (#20078433) Homepage

    The 'bubble' I see has nothing to do with companies and investors and such like the craziness that happened to .com, it has everything to do with businesses and paradigms. A couple of examples:

    The paradigm of audio / video content industries is changing in a way that the current industries can't control or predict, or they're unwilling to explore the direction it's taking via their users and try to create something that matches their consumers' desires. There's room for a massive technological 'boom' there (as long as there's good product, which I'd argue against now; bloody Nickelback my eye!). iTunes is a good start, but it will evolve.

    The paradigm of the online 'superpower' will change too. For the last few years it's been 'search', where Googles and Yahoos and MSNs have risen up being 'teh best search'. Searching on one is like searching on another, but of course advertising sneaks in and they can pay to be searched out!! Well, not being able to get real content will piss your users off. How long before:

    • a critical mass is reached where users are fed up that they only get advertised links when they search, so they move on to some unknown 'search engine' (like Google used to be)
    • advertisement agencies realize they're not making any money off the links / priority they're buying because people (including them) are ticked with them and they stop buying

    Then what happens to Google (for example)? They make a lot of money and a lot of cool free and hip products, but most of it is paid for by horrible advertising. If that money no longer flows, there's a bust there.

    My point (maybe poorly made) is that there are plenty of opportunities for boom and for bust. Yes, the company's business plan is something and I hope someone like Google has a plan, but following the trends and paradigms of what people want to do is ultimately important to stay on top. Right now in "web 2.0" (gah, I feel dirty), the paradigm is that everyone wants to create and get to their own content. They're much less interested in advertising and stuff like that, unless they put up Google ads on their own site to bring in tiny amounts of cash. What's next? That's the challenge. There won't be anything like the .bomb again, because people and investors are no longer near as stupid (or at least I'd hope that's the case). Now it's much more "what do we do with what we know" than "hey, let's make a tech company and raise money."

  • by turing_m ( 1030530 ) on Wednesday August 01, 2007 @08:14PM (#20079617)
    1. Say obviously wrong and contentious stuff.
    2. Generate hits from people who have an urge to correct but do not realize they are being duped.
    3. Collect Ad revenue.

    No ??? anywhere in sight.
  • by p7 ( 245321 ) on Wednesday August 01, 2007 @08:43PM (#20079923)
    My point is that the CDROM multimedia bubble, wasn't a bubble. Nobody was investing in these business to the level that it would have caused an large economic impact. The bubble phenomenon is when we ignore the value or can't correctly value the business and we continue to invest in it, as you mentioned and eventually someone is going to get come to their senses and cause a selling frenzy (The pop of the bubble). I didn't read TFA, because I do believe that most of his commentary is designed spread FUD and bring views to his column. That being said I belive the CDROM bubble he evidently mentioned is likely similar to this http://en.wikipedia.org/wiki/Video_game_crash_of_1 983 [wikipedia.org]. Since there wasn't widespread speculation in these markets there was no bubble to pop. There is a cycle, but it happens alot and doesn't have the impact of a bubble. The big bubbles to pop in the 20th century was dot com bust and the stock market crash in the twenties and Dvorak implies that this Web 2.0 will be at least worse than the dot com bust which I find hard to swallow.
  • by fyngyrz ( 762201 ) * on Wednesday August 01, 2007 @09:40PM (#20080385) Homepage Journal

    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!

  • by bob frost ( 850405 ) on Wednesday August 01, 2007 @10:36PM (#20080775) Homepage
    You are 100% correct. What usually causes a bubble is the BS pedaled by those puffed-up MBA "stock analysts." Think of housing: analysts kept hyping financially-thin high-risk lenders b/c the returns were SO fat, even if it couldn't last.

    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.
  • That's an easy one (Score:3, Insightful)

    by p3d0 ( 42270 ) on Wednesday August 01, 2007 @11:16PM (#20081039)
    The current P/E of NASDAQ is 24. [yahoo.com] That's a tad high; with bond yields around 5%, [nber.org] a P/E more than 20 must be based on growth speculation. I could reasonably see the NASDAQ losing 20% of its value in one shot. However, during the bubble, the P/E of the NASDAQ was over 100. [economist.com]

    It's hard to overemphasize the difference between these two numbers. Look at the ratios between the NASDAQ P/E numbers and bond yields. Our current ratio is 1.2, which is 20% "too high". The bubble ratio was over 5.8, which 480% too high. The two situations are not even comparable.

    If the NASDAQ actually lost over 75% of its value, like it did when the dot-com bubble burst, I'd be buying as much of QQQQ as I could get my hands on.
  • by Short Circuit ( 52384 ) <mikemol@gmail.com> on Wednesday August 01, 2007 @11:20PM (#20081065) Homepage Journal
    Have you ever seen a Slashdotting? My site was posted on Sunday morning, and Google Analytics tells me I had about 20,000 pageviews in the first full hour of exposure. (I forget the exact max number I saw, but the server load average exceeded 150; If you have a shared hosting account whose idiot admins run PHP as CGI, just hope you don't get Slashdotted.)

    I don't know what a site gets for ad revenue, but 20,000 impressions are bound to get more than a few clicks.
  • by jrumney ( 197329 ) on Thursday August 02, 2007 @05:47AM (#20083265)
    Destroying one house means another needs to be built in its place. This creates wealth for the people involved in its construction, and eventually for the new owner and the bank who finances their mortgage. As the original poster said, the wealth doesn't go away, it just shifts away from the idiot who destroyed his house.

Get hold of portable property. -- Charles Dickens, "Great Expectations"

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