Is 'Web 2.0' Another Bubble?

Carl Bialik from WSJ writes "Two tech VCs, Todd Dagres and David Hornik, debate whether there is a bubble in so-called Web 2.0 companies looking to cash in on a resurgent online ad market. In the WSJ.com debate, Hornik writes: 'Venture capitalists will rationally stop investing in ideas that don't bear fruit. Those that do bear fruit will gain traction and either be acquired or go public. Those are the traits of a rational market in my mind.' Dagres responds: 'I think the Web 2.0 space will have a higher mortality rate than other segments of the overall media and technology industries. There are far too many MySpace and YouTube genetically challenged clones. All but a few will fail. The winners are generally the ones that get in early and out before the bubble bursts. There are rare examples of bubble companies making it through the bust and going on to become successful and valuable companies. By the way, the combined cash flow of Spot Runner, LinkedIn and Facebook is less than that of one Costco store.'"

Is that a lot or a little?

[ScentCone]

By the way, the combined cash flow of Spot Runner, LinkedIn and Facebook is less than that of one Costco store.

I mean, have you seen a Costco on a Saturday before a ball game?

Re:

[seanadams.com]

If I had to guess I'd say: Average receipt: $250 Customers per hour per checkstand: 10 Active checkstands: 10 Saturday hours: 8.5 250 * 10 * 10 * 8.5 ~= $200K total saturday cash flow

Re:

[Salvance]

You're not too far away. The average Costco sells $115Million in merchandise per week, or approximately $2Million per non-holiday week. Costco's (and other retailers) get about 20% of their weekly sales on a Saturday, which would mean ~$400K on average.

Figures dont lie...

[Lanoitarus]

By the way, the combined cash flow of Spot Runner, LinkedIn and Facebook is less than that of one Costco store.

Cash Flow != Profit.

Costco has a incredibly high cash flow and an absurdly minimal margin. So do grocery stores. Facebook, on the other hand, has what im willing to bet is a pretty high margin on its fundamental product. This has to be one of the most utterly stupid, biased, half truth lines ever.

Heres an equally accurate (and equally misleading and biased) half truth in the other direction:
Facebook has nearly 50 times the profit margin of a Costco, walmart, and target combined. Clearly Retail is a bubble about to burst.

Id take Reaganomics over this kind of bullshit financial analysis any day.

Re:

[Sparohok]

Costco earns a profit margin of about 2%. The profit margin of Facebook is probably negative.

Costco earns an operating margin of about 3%. The operating margin of Facebook is unlikely to be higher than about 30%.

So, whatever metric you use, your statement is almost certainly incorrect, whereas Mr. Dagres made a statement that is plausibly correct.

He's not doing bullshit financial analysis. In fact it is textbook financial analysis to use cash flow statements as a bullshit detector. The cash flow statement

Re:

[radtea]

"I'll take cash flow over gross margin -- I can eat cash flow."

Only if there's enough of it to pay off the costs of generating the cash flow in the first place.

While no one number is sufficient to capture the financial health of an enterprise, an over-emphasis on cash-flow was one of the characteristics of the bubble investing in the late '90's. Cash flow management is critical to the success of a startup, but too often investors and managers focused on cash flow maximization at the expense of sustainabili

Re:

[Sparohok]

Did you even read past the first sentence of my post? Do you know the difference between operating margin and profit margin? I agree with you that Facebook's operating margin could be not just higher than Costco's, but easily 10 times higher. However it is mathematically impossible to have an operating margin 50 times higher than Costco's as the parent claimed.

As far as Facebook's profit margin is concerned, I believe it's probably negative. The reason I'd say that is that they were lining up venture financ

Re:

[unother]

It's not cashflow per se which determines the viability of a business; but in the world of finance cashflow will help determine exactly how liquid an operation is. His metaphor is, admittedly, a bit stretched... but when you compare the mindshare and proposed prospects these companies PR and Financial Advisors snow you in with, he is using a decidely utilitarian and "Old Economy" (note, this is no longer disparaged) method of determining potential for future health.

You see: CASHFLOW is the incomings and ou

Re:Is that a lot or a little?

[Colin Smith]

I mean, have you seen a Costco on a Saturday before a ball game?

And people say Americans have no culture.

 

Re:

[nuzak]

> Yes, it's another bubble which can ultimately be traced back to fiat money

The perception of value has nothing to do with a fiat economy. The original tulip craze took place on the gold standard.

There is no such thing as Web 2.0

[phrasebook]

And the only bubble to burst is the term 'Web 2.0'. The sooner the better.

Re:

[nate nice]

I have to mainly agree with this.

It's nothing more than a buzzword of sorts at this stage.

If it's surprising that the Internet would adopt new technologies and ideas, then whoever feels this way hasn't been in technology longer than a day.

But, is anything in Web 2.0 even defined? Just what is it? The ability to communicate without a postback? Surely it's much more than that, right?

I don't think this Web 2.0 thing has existed yet.

I believe some people have ideas about what the Internet could/can and will

Re:

[ultranova]

It's hard to take a source seriously, though, when stuff like this found:

Don't think of applications that reside on either client or server, but build applications that reside in the space between devices. ("Software above the level of a single device")

What does that even mean? From a development perspective, what practices enable me to write software "between" devices?

It means a combination of server and specialized client software. World of Warcraft, for example. Or, possibly, P2P programs like Fr

the O'reilly trademark might speed things up

[SuperBanana]

O'Reilly has trademarked "Web 2.0" [oreilly.com].

The note about revenues compared to one Costco store is pretty sad. It makes me wonder where any of the other "blogger" "elite" sites stock up. I always deeply suspected that most of the "web 2.0" and "blogger" fad was just a giant San Francisco circle jerk by people who think far too highly of themselves [xeni.net].

Re:

[jerryasher]

The sooner it bursts the better as I hold the trademark to Web3.0, Web4.0, Web5.0

yes no fud notfud maybe

[WilliamSChips]

Seriously, that's pretty much all you can say about this.

Federal Reserve

[P3NIS_CLEAVER]

It's a bubble because the FED is printing too much money. Eventually foreign investors will figure it out and the dollar will go down the toilet. You've been warned.

Re:Federal Reserve HEY MODERATORS!

[argoff]

It's a bubble because the FED is printing too much money. Eventually foreign investors will figure it out and the dollar will go down the toilet. You've been warned.

I'm sorry, but this should be modded +5 insightfull, not -1 offtopic. The fed printed up a bunch of money, used it to buy US bonds (to finance the war in Iraq), and now people are supprised that the price of every commodity across the board has doubbled in the last 5 years. Well, hint hint, they haven't - in "real" terms it's the dollar that's gone down in value far more than the commodities that have gone up. The only problem is that they loaned out so much freaking money that now society is saturated in more debt than it can pay back. By any standard, the US is bankrupt.

Well, guess what. They only have one choice: "print up money and buy stocks" and that's exactly what they've been doing. But it will fail for the same reason that any central planned economy fails, and it will be very very ugly. Forget stocks, people should buy gold and prepare for the US dollar not to be a currency anymore. It really is that bad.

Re:

[shystershep]

Did you live through the 80s? If so, were you awake and/or at all aware of the U.S. economy?

If so, I can only assume that you have no understanding of economics if you think we're so much worse off now.

People gripe and moan about the failure of our education system related to the hard sciences, but compared to the social sciences such as history and economics the hard sciences are doing pretty good.

Re:

[budgenator]

I have to disagree with you about that, both sciences, social and hard suffer from the same basic thing, a lack of the ability for ordinary people to engage in critical thinking. let's look at the great depression, the money system was deflated, unemployment was about 25%, pump up the debt and use the extra money to put people to work, the results was it cause inflation, and fixed the money system and ended the depression; next come the '80s the money system is inflated 6-8% inflation, unemployment is about

Re:

[jlarocco]

A good number of historians would disagree you on that. Most say WWII ended the Great Depression.

Obviously, a good number of historians never went very far with economics.

There's a fair amount of evidence pointing towards a recovery from the depression even without WWII. The government was starting to buy a lot of highways, bridges, and other public goods in order to put people to work. Of course WWII sped up the process a great deal, because suddenly the government needed a shitload of planes, sol

Re:

[Ceriel Nosforit]

This has always confused me. I have such trouble understanding how war improves economy. Tom me it seems to go like this;

1. Gov't needs to buy bombs. Buys them with money collected from taxes.
2. Private companies sell bombs, uses money to pay salaries.
3. Salaries are taxed, leftovers used to buy fun and useful things.
4. Bombs are dropped, destroyed, along with resources and infrastructure (plus fun and useful things).
6. After the war, gov't buys new infrastructure to replace the old.
7. Private companies sel

Re:

[budgenator]

well
ITEM 1: Gov't needs to buy bombs. Buys them with money collected from taxes.
not all the money is from taxes, some is borrowed from people/institutions and are called bonds, now the "money" your talking about is called M1, cash and checkable deposits, the bonds are called M3, and both are money, just different kinds. When a statement about economics is made, the part that typically left out is the "Other things being equal" part. Increasing the money supply faster than the demand for the money makes it

Re:

[Ceriel Nosforit]

Yes, but it all boils down to a very simple thing; things are built, then promptly blown up only to rebuild it. That's a monumental waste of resources. Would be better to repair the old stuff and only build new when it's actually needed. The economy would cool down, but who says that's a bad thing? If I repair and maintain my old things (write faster code instead of constantly buying new computers, for example) I can spend my money, and therefore the world's resources, on something better.

Removing money fro

Re:

[Ceriel Nosforit]

That type of warfare ended with WWII. Today in the global economy there is little difference between friend and foe, as evident by the enormous amount of cash pumped into rebuilding Iraq. Yet we (Well, some of us.) still insist on blowing things up even though we know we get the bill after the party. Yet, writing the bill up as debt and never paying it seems to work perfectly fine too! Debt decreases the value of currency, which in turn increases export.

It seems like employment is more important than produc

Re:

[Ceriel Nosforit]

There are lots of contracts, big contracts, to rebuild Iraq. The locals aren't paying for it.

Re:

[argoff]

Uhh, the 80's didn't have an account deficit of over 6% - I'm sorry but that's Argentina territory. Also, during the 80's they raised interest rates to 21% to halt a panic out of the dollar. If they do that today, the US economy will be ripped to shreds.

Re:Federal Reserve HEY MODERATORS!

[Colin Smith]

I reckon you're basically on the right track, but it's very unlikely to result in armageddon. What'll happen instead is that china, japan, opec etc will get tired of losing money on their dollar reserves and will diversify (are already diversifying) and start selling the US bonds, the dollar will fall further, interest rates will rise further.

It will however balance out. China, Japan and OPEC can't simply dump 2-3 trillion dollars worth of bonds, they would be insane to do so. Instead they'll simply make Americans pay their debt. The US is just going to be saddled with high interest rates and high inflation for a while. At the end the dollar probably isn't going to be such a favoured reserve currency and Americans will have to work that little bit harder, just the same as the rest of the world.

They do currently have another option. Stop printing money and start running a surplus budget.

Oh Btw, the big problem isn't Iraq, that's just causing a gradual slide, it's the retirement of the baby boomers, we should start to see the effects fairly soon.

 

Re:

[Deliveranc3]

Hi from Canada,

We're pretty scared that the Chinese will stop keeping the American dollar afloat (They have a static exchange rate) or that OPEC will make oil transactions in Euro's instead of U.S. dollars.

If either of those happens we're going to be looking at a BIG BIG BIG recession.

Don't take us with you plz! Just FYI! K Thx bai!

Re:

[Apotsy]

If the USA economy goes in the toilet, so will those of a lot more countries than just Canada. China for example will feel the pain too, since the US is a very large consumer of their goods. If the US can no longer afford to buy its products, there goes their double-digit growth rate.

Silly Canadians

[SRA8]

Silly Canadians. You have enormous oil reserves. Guess what that means? It means we Americans will find some "evidence" or another to invade your country and take all your resources. All that war booty inflow will help us pay the debt on our treasury bonds for decades to come.

Re:

[Ceriel Nosforit]

I wish I had mod points again. :D

Re:

[Opportunist]

As long as the US has the ability to "tax" foreign countries, all is well.

How? By having the de facto international currency. Take a handful of dollars and you'll see that they are accepted as legal tender pretty much everywhere on the globe. Yes, even in countries like Iraq or North Korea. For the simple reason that those countries need Dollars for international trade, too.

Pretty much every country on this planet has Dollar reserves. The price of internationally traded goods is given in USD, and more often

Re:

[novus ordo]

Lets take that a step further: what is keeping the dollar the "international currency?" The Petrodollar [wikipedia.org]. I don't think you're aware that you can only [wikipedia.org] buy oil for dollars (Iran is trying to change that though; Iraq tried guess what happened).

Re:

[Opportunist]

Well, some countries are talking about it. A few tried. Iraq, for example.

The response is known.

Re:

[xENoLocO]

I don't mean to post off-topic and what not, but I couldn't help but notice your javascript mouseover menu on your (I think that's a) website.

Do you really have relevancy to speak on this subject?

Re:

[Colin Smith]

If the Chinese ever "call in our paper" we would experience a recession while their country went down in flames.

That might have been true were the dollar the only reserve currency... By diversifying into euros and others, the currencies in question will increase in value making imports cheaper for those countries. Imports from for example china.

e.g.
http://www.ft.com/cms/s/0ca841d4-c3c7-11da-bc52-00 00779e2340.html [ft.com]

A bad thing?

[Potor]

If the Web 2.0 is about user-generated content, is it a bad thing if it can't be monetized easily? I mean, I thought the point was our Web, our way?

High Startup Cost

[Bonker]

While I agree that we're probably about to have a minor watershed of dead web 2.0 companies, something that's often neglected is that websites are relatively inexpensive to maintain when compared to a brick and mortar location. You pay for bandwidth, new development, and storage.

If managed correctly, this is far less expensive than maintaining a 'real world' location.

If I were an investor, I wouldn't write off the Web 2.0 companies as a whole, but I would be leery of things like high salesman salaries, a large management to production employment ratio, and an absence of realistic business plans.

We still have the best of the Web 1.0 bubble with us, and they're profitable. Five, ten years from now, we'll have the best of the Web 2.0 bubble with us and will be speculating about which of the 3.0 companies are next to go.

Business as usual

[PingSpike]

The whole thing smacks of business as usual to me. Lots of shitty companies with bad ideas flood into the market and die, and a few clever ones succeed. The same stuff happens in the 'real world'. The only difference is we don't call it 'Real World 2.0' every time the tides turn.

Now, I'm not economist, but a lot of investors lost their shirts in the dot-bomb and going to be put off the technology sector all together. I'd say thats going to act as a mitigating factor. People aren't just asking whats the hot

Re:

[budgenator]

Well don't forget all, or at least some the mad-money the was once the investor's shirts went somewhere, from what I understand the salvage equipment from the dotBomb is just now drying up; yet still it's good strategy to invest most of your money in rock-solid companies will proven and boring profit records, and to put a little bit in high risk whacko stuff that just might pay off instead of taking a vacation in Los Vegas.

youtube and google is actualy a good fit google lives and breathes bandwidth manageme

Re:

[Shelled]

"...something that's often neglected is that websites are relatively inexpensive to maintain when compared to a brick and mortar location.."

Possibly, however maintenance isn't start-up. Many of these Web 2.0 ventures are exactly that, capital ventures, and those are typically anything but lean and mean. My employer company jumped on the 'portal' thing with Excite a few years back and dropped $70 million, some on the typical Web essentials of designer chairs and oxygen dispensers, over

tagging beta: yes

[mandelbr0t]

If you have to ask...

Web 2.0 looks to me to be the same as the .COM bubble. There's a bunch of hyped technologies, a bunch of consulting companies monopolizing the HR, a bunch of VC firms with slush funds to melt, and very few people that actually understand any of it. I don't see any changes to marketing or project hype; a presentation to my 2004 technical college class sounded like it was written by c.2000 .COM gurus. All in all, it seems to me that the Web 2.0 bubble is based on the same psychology as .COM: "Anybody who understands the technology is too dumb to understand the business".

Let me try and expound on that last statement a bit; it is based on personal experience, not some knee-jerk reaction. I got hired as a consultant about 9 months before the .COM bubble burst. I knew a crap-load about CGI and server-side scripting and HTML and Unix and Apache and so on. They seemed to pay me well, until I took into account the down-time between contracts. Moving out of the IT industry didn't seem to be an option as long as I was in the recruiters' databases. On the bright side, I'm not so dumb about the business any more. The business is effectively this: "I don't know how to implement X, but I know how to bully some techie dweeb into implementing it for me for a tenth of what it's worth."

All of the latest marketing and hype for Web 2.0 seems to have this same negative attitude about tech. dweebs. Geeks become slaves, IPOs go through the roof (but you can't afford the shares on a geek's salary) and companies sell vapourware. Projects go over budget, get extended, fire their entire team, hire more expensive consultants and extended again. The last contract I was at was still suffering from this crap. The product had been in development for 4 years by 2-3 people full-time, and I could still write a better version in 6 months by myself.

If there was an obvious decline in corporate corruption, I'd say that Web 2.0 might not be such a bubble. AJAX and other "dynamic" approaches do offer a better end-user experience. Broadband content is commonplace. Blogging is popular. But the overall negatives vastly outweigh the positives. We need to stop thinking about technology as a short-term investment strategy, and consider the overall societal impact. I'm not in it for the IPOs myself; I hope those that are start to listen to the geeks. "Don't make me angry; you wouldn't like me when I'm angry" :P

mandelbr0t

Re:

[moore.dustin]

All of the latest marketing and hype for Web 2.0 seems to have this same negative attitude about tech. dweebs. Geeks become slaves, IPOs go through the roof (but you can't afford the shares on a geek's salary) and companies sell vapourware. Projects go over budget, get extended, fire their entire team, hire more expensive consultants and extended again.

Huh? What? I mean, for the most part, what you just said was similar about the Web 2.0 bubble and the .com bubble is actually.... well it is what is different, not similar.

Geeks become slaves? Well maybe here and there, but the Open Source movement is happening right along side the Web 2.0 movement.

IPO's through the roof? Nope, not true. This bubble is more about being bought out than going public. Acutally, almost all the new about anything is a buyout, not a IPO.

Companies selling vaporware? Not

Re:

[mandelbr0t]

Projects go over budget, get extended, fire their entire team, hire more expensive consultants and extended again? Examples? This sounds like a company looking to embrace Open Source, not some Web 2.0 thing.

Hmmm. Actually, it was a company that embraced Microsoft. And they did that because they got tired of Sun. I'll admit that there's some truth to many of the points you brought up, but I stand by my corruption argument. And, in a strange way, you've proven the "geeks don't know business" argument.

Try being a little cynical for a few minutes, and stay with me. The issue in this particular case was not how quickly the project could be done; in fact, there didn't appear to be much interest in creating a workin

Re:

[moore.dustin]

And, in a strange way, you've proven the "geeks don't know business" argument.

Well I own my own business and ran a 100% internet based retail site for well over a year. To say anyone does not "know business" is going to be right. You are speaking of a different part of business, one in which you are working for the man. I know what part of business I do know, but to say that me, as a geek, does not know business in general is sort of insulting.

Re:

[inKubus]

If everyone is doing something and making money, it's a bubble--if it has these characteristics:

1. It serves no apparent useful purpose
2. You don't see easily how anyone can make money doing it
3. Everyone you know has made so much money doing it

Anything that inflates to quickly will POP. The problem is that ANYTHING that makes money these days is pounced upon by get rich quick assholes who drive up prices and kill the whole thing. There's no such thing as an unsaturated market unless you innovate or in

Irrelevant

[denoir]

Ultimately a bubble or not is irrelevant. Today investments in Internet technology are considerably higher than they were during the peak of the IT boom. A boom-bust cycle is perfectly normal for the early stages of just about any technology. Short term expectations are usually inflated but the long term impact is consistently underestimated.

Information technology is developed at an exponential pace - and we are nowhere near a saturation.

Re:Irrelevant

[Citizen of Earth]

“Wall Street is always the last one to the party, drinks the most, then has a huge hangover.” — peter penguin

Just ads!?#@!

[recharged95]

"surgent online ad market"

Really, if all web2.0 is about ad supported services, then we are truly heading for a bust. Ads are like having prostitiution support your schools. Also, features such as "more collaboration" is great, but it not a revolutionary thing.

Great, another fine use of all those MBA degrees on Wall Street.

Re:

[vertinox]

Ads are like having prostitiution support your schools.

So if I use Ad block extension, it means I'm having sex with prostitutes for free?

Re:

[Grant_Watson]

Ads are like having prostitiution support your schools.

Am I the only one who missed the connection here?

Re:

[budgenator]

you mean like since our schools are all ready supported by the second oldest profession, gambling, we should add the world's oldest prostitution to the mix?

Re:

[AuMatar]

On behalf of prostitutes, I'm insulted. Prostitutes perform a service in exchange for money. Its a fair deal for all involved. Advertisers are slimeballs who steal your time with a web of lies and half truths, attempting to con you out of your money. I'd rather have prostitution support my schools than advertisements.

Re:

[AuMatar]

Lieing (99.99999999999% of all advertising) is unethical. Forcing me to view/listen to your ads is unethical. Product placement is unethical. There is nothing good about advertising, the entire field ought to be outlawed.

Re:

[Rakarra]

Lieing (99.99999999999% of all advertising)

Oh come on man, your hyperbole does not serve the arguement well. I'm no fan of advertising, but no one pays attention to arguements like that.

Re:

[AuMatar]

Hyperbole? I'm probably understimating. AN advertisers job is to lie and trick you into buying their stuff.

Re:

[Rakarra]

An advertiser's job is to convince you to buy his stuff. Lying and tricking can be involved a good amount of the time but often "department store store-wide sale 30% off this Saturday" and "Free 19" LCD monitor with the purchase of so-and-so computer while supplies last" aren't lies.

Re:

[Junta]

One, that analogy made zero sense.

Two, ad supported media businesses do have precedent, it's called broadcast TV.

Re:

[Abcd1234]

Really, if all web2.0 is about ad supported services, then we are truly heading for a bust

You *do* realize that's what TV is all about, right?

Pretty much

[TodMinuit]

I'm reminded of a Slashdot comment [slashdot.org] from a ways back:

The new dot-com business are like donkeys chasing a carrot on a stick. They just keep on walking, never getting any closer to the carrot, but expending a lot of energy (money). They need some company to come along and give them the carrot.

I call this "The Paul Graham Business Plan".

This doesn't sound like Paul Graham

[teutonic_leech]

I do agree with the comment, but disagree with calling this the 'Paul Graham Business Plan'. Paul has dozens of essays on his site which propel entrepreneurs to do exactly the opposite - produce real value by solving tough problems. He's also very adament to raise very little money at first and that too much money can actually kill a start-up. Anyway, take a look at his site: www.paulgraham.com

So will there be a Web 3.0?

[TheWoozle]

Or will we call it Web2008? Maybe WebXP? How about WebDuo2?

=P

Re:

[Frosty Piss]

All of those domains have been taken by squatters...

Re:

[joe_bruin]

It shall be called Web.Net

Re:

[Jose]

it shall be dubbed Web for Workgroups.

To point out the person pointing out the obvious.

[nick_davison]

'I think the Web 2.0 space will have a higher mortality rate than other segments of the overall media and technology industries.'

Wait a moment, the characteristics of a fast moving segment of the business world is that it moves faster than the other segments?

Wow. I wish I could be an analyst.

My prediction for 2007: Thirsty people will continue to buy water.

web 2.0

[dheera]

there is no "bubble" in web 2.0.

the point of websites such as facebook, youtube, digg, etc. are not to stay aronud forever. instead, the point is to take advantage of technologies and trends today (broadband, social networking on the web, etc.) to create something interesting for people.

sure, ad revenue off a website is nothing compared to a costco store. but for paying a few hundred bucks to get your site colocated or hosted and then running ads, you can sit back, relax in a chair, and watch money pour int

Re:

[Prof.Phreak]

Setting up a profitable site isn't "a few hundred bucks", and it's not a ``small'' investment unless you're a very small shop and working on your own (or with your friends) for ``free'' (on your own time).

As soon as you start paying folks for work, it gets really expensive (a few good developers, consultants, sales folks, rent(!), and you're looking at a multimillion dollar operation---unless of course they work for peanuts, which most good developers don't).

Also, the idea of `setting up something', and the

boredom

[Darth Cider]

If Web 2.0 means sites that aggregate info that isn't boring, how can that fail? If it refers to sites like Facebook, where people can connect with real people, how can that fail, unless everyone is boring to everyone else? People go out of their way to find what interests them, but not TOO far out of their way. Minimizing the work of finding what is interesting--is that Web 2.0? Speeding up page-loads? Speeding up connect times to what is interesting? I don't see anything really new about the info availabl

Re:

[Ernesto Alvarez]

If Web 2.0 means sites that aggregate info that isn't boring, how can that fail? If it refers to sites like Facebook, where people can connect with real people.....

It's not the "connection" part that will fail, it's the economic part.
Sure, you might make the best site ever, holding the most interesting collection of data of the whole universe. That does not mean that you will make enough money by selling ads. Also note that ads get in the way of when you intend to have faster loading times and going straigh

Old news...

[UOZaphod]

There's already several items regarding this showing up in my mashup, and I wrote about it in my blog, and I talked about it extensively in my podcast, and I updated the wiki. ...sorry, I can't go on. If I spew any more stupid buzzwords I won't be able to tell if I'm puking or not.

Its all about the CPM

[coldtone]

For some sites this is a bubble.

TechCrunch makes $60,000 a month for just 2.5 Million page views. Thats $24 CPM ($ per 1000 page views), or 2.4 cents every time a page is rendered. This bubble will burst.

The average joe is lucky to get $2 CPM. Which I think is much more reasonable.

http://money.cnn.com/magazines/business2/business2 _archive/2006/09/01/8384325/ [cnn.com]
http://www.sitemeter.com/?a=stats&s=s26techcrunch& r=33 [sitemeter.com]

Audiences beg to differ

[bagsc]

We're not reliving 1999-2001, we're reliving 1996-1998. The difference is Google, Myspace and YouTube are actual phenomena, unlike Webvan or Pets.com. Myspace is possibly the most popular property on the Internet, and YouTube is the leader of video, which Tech/Telco/Media has been buzzing about for the last ten years. Ebay and Amazon, Internet success stories, are barely fighting off sites like Facebook, Craigslist, Wikipedia, and Blogger.

Baidu, Digg, Flickr, Orkut, Tencent QQ, Photobucket et al are prob

Sounds so familiar...

[Junta]

Yes, all those sites are highly popular, but there were sites that were popular then too. Just because you are popular doesn't mean your business plan is viable in terms of long term expense to income ratio. To some extent, companies then that may have otherwise been reasonable got caught up in the hype and overextended themselves. I worked at the time for a company that had been stable for several years before the excitement of the late 90s. They weren't particularly exciting, but they held their own.

Real Web2.0 Profits

[LilBlackDemon]

The real profits of Web2.0 come directly from the areas we don't think they're coming from. People are very likely, because of the supposed anonymity of the internet, to post things publicly that they normally would not discuss in person. Also, they are more willing to post their tastes publicly than would normally be discussed.

When was the last time you read someone's favorite books, movies, or TV shows off of a Facebook or Myspace profile? What about the comments on some recent product purchase in a blog (that's even what my blog is about)? What goods could you see in the background of the latest hot YouTube video? Ever wonder why your Gmail doesn't want you to delete old messages, even if they're useless, but instead "Archive" them?

"Web 1.0"'s advertising-driven model was about getting users to click on their ads. Companies would throw ads everywhere, with the hope that people would bite. Web 2.0 is more about gathering background on customers so that retailers and manufacturers can market more successfully to them. The ads on digg can look at what you've dugg in the past, so that they can have a more informed base for what they're going to pitch to you. It's one thing to say that a sporting goods company should advertise on ESPN.com and a software developer on Slashdot, but if you take your market research further than you can advertise for the perfect place to go after your team's next home game on ESPN.com or where you can find some good reference books for your language of choice on Slashdot.

It's not about getting in and getting out. It's about the data you collect. And if these companies are smart then they can bill on a subscription model for their customer information databases and be in business for quite some time. This is because background data is vital to marketers, and they will pay exorbitant amounts of money for the data. This should more than offset the operating costs of a website.

MySpace vs YouTube

[rinkjustice]

You can't tell me myspace.com is worth 850 million. That's just rediculous. Even in it's prime, Myspace was nothing more than a flea market of degenerate culture. But then again, I look at Rupert Murdock's other holdings and I can see why he was so enamoured with it.

YouTube is different. I see potential here. If anything can penetrate the caustic grip of the few transnational corporations who own the media and information in United States, it may be Google's YouTube. There are a number of ways they can gene

Like, sooooo 2006

[plopez]

It's all web 3.0 now. 2.0 was a flawedconcept, go with 3.0. It is the most reliable, most secure, largest ROI and lowest TCO http://www.iht.com/articles/2006/05/23/business/we b.php [iht.com]

It leverages collaborative synergies in an open and proprietary way to deliver value for interactive component architecture.

It is so now, so modern so YOU! The smart set are 3.0!

Seriously, does anyone doubt me when I say that IT is just like the fashion industry?

That's why in 6 months I hope to be done with it.

Slashdot Skeptics

[FreshFunk510]

As someone who works for a company that would probably qualify as "Web 2.0", I'm really sad to the see the skepticism of Slashdotters. I can understand why though: it's the Slashdot bandwagon to jump on. Dump on Web 2.0 because it's all just hot air.

Personally, I'm refreshed at the resurgence of technologies since 2003. After the bubble burst, there was little or no investment in tech/Silicon Valley. It was no-mans land.

Since then, I've seen a bunch of products that would be classified as Web 2.0

Time for Web 3.0!

[Opportunist]

Seriously, why did we wait so long? It's been a very dry spell between Web 1.0 and 2.0, with about 5 years of unemployment and underpaid jobs for us geeks.

For the future, we should aim to launch the next gen faster. It seems investors don't care about their money anyway. One should assume that they've learned their lesson after the dot.com bubble burst. That the market isn't limitless and that copying a concept isn't profitable.

Well, it seems they don't learn. It's just the same crap all over. A handful of

Sustainability

[sacrilicious]

Hornik writes: ...'[Ideas] that do bear fruit will gain traction and either be acquired or go public. Those are the traits of a rational market in my mind.'

I find it odd that so many people think like this. I.e., that to be a success a company MUST be bought, either by the public or by another company. In either scenario, the company being bought loses most of its capability to be rational and agile... so selling is an act that destroys value quite a lot of the time, not just in terms of lost profits t

Are we STILL discussing if such a thing exists ?

[unity100]

The only time web 2.0 comes to my mind is when clients ask "some little bit of this and that" to "lighten up" their site. and they dont seem to care much about it either.

NO

[imsabbel]

because that was JUST the argument in the first bubble: "well, they only burn money without revenue. But its a totally different market, so lets boost them further!!!".

We are again reaching the point where decorated turds get market capitalisations in the 100s of millions.
And still, they simply arent worth it.

Re:

[Breakfast Pants]

Well considering that the cash flow of an operation like facebook winds up near 100% profit (servers, bandwidth, few employees), and the profit in the cash flow of a costco store doesn't come close (building rent, they items they are selling aren't free, returns, service, etc.) it doesn't seem very fair.

Re:

[julesh]

Investors care about growth.

Investors care about returns. Growth is only one way for that to happen. A steady stream of large dividends from fairly constant profits will keep them happy too.

Re:

[mustafap]

You just posted to one :o)

Re:

[blugu64]

Wha?

Slashdot has been around longer then this "Web 2.0" thing. How exactly is slashdot "web 2.0"?

Re:Web 2.0 Url Please

[Giometrix]

"Well then, whats so new and cool about Web 2.0? I've been using slashdot way before they coined the phrase."

Some businessmen somewhere realized that they can use "community produced content" to drive their sites rather than having to pay for writers and editors to produce content.

Our boss just gave us the "we will move toward web 2.0" speech in our "year and review" meeting. Free, up-to-date content (via forums) was the reasons he gave for moving toward "web 2.0".

That's all fine and dandy. Except that achieving a GOOD community driven site is not easy. You really need to reach a critical mass of users before your site's community will generate good, useful content that will attract more readers (and thus grow your community, and ad dollars). Would slashdot be as appealing to you if the community was only a handful of people? The news comes late, and you don't even get the whole story. The whole reason you come here is for the community's feedback to the stories. Most sites don't achieve anywhere close to this level of success, and their forums lie dormant with at most a couple of posts.

Eventually managers will realize that the promise of free "web 2.0" content is not as easy to achieve as they thought, and the pendulum will swing back toward "web 1.0."

Re:

[nuzak]

> Please give some Web 2.0 URLs besides slashdot

Slashdot is not a "web 2.0" site. It uses virtually no javascript, let alone AJAX. Its fonts are normal sized, it uses very few gradients, and not all the corners are rounded. It's also old.

As for five: flickr, digg, del.icio.where.the.fuck.do.the.dots.go.us, 37signals.com (3 "web 2.0" apps there), technorati

Re:

[budgenator]

well let's see

<script src="//images.slashdot.org/prototype.js?T_2_5_0_13 9" type="text/javascript"></script>

<script src="//images.slashdot.org/transitions.js?T_2_5_0_ 139" type="text/javascript"></script>
<script src="//images.slashdot.org/yui/yahoo.js?T_2_5_0_13 9" type="text/javascript"></script>
<script src="//images.slashdot.org/yui/dom.js?T_2_5_0_139" type="text/javascript"></script>
<script src="//images.slashdot.org/yui/event.j

Re:

[nuzak]

So much javascript, still no actually usable comment navigation. Aside from the tags UI, where is it? The reply textareas don't even focus by default.

Re:Web 2.0 Url Please

[The_Wilschon]

http://calendar.google.com/ [google.com]
http://www.flickr.com/ [flickr.com]
http://www.wikipedia.org/ [wikipedia.org]
http://del.icio.us/ [del.icio.us]
http://docs.google.com/ [google.com]

You might try Tim O'Reilly's [oreillynet.com] explanation, since he coined the bloody term in the first place.

Oh, and of course you heard of and used web 2.0 sites before anyone called them web 2.0. Think about it. Tim O'Reilly didn't sit around and think, hmm, let's come up with something we could call web 2.0. What would it be? And then went and made a bunch of people start implementing his ideas. It is descriptive, and the term to describe something (as happens pretty much always with history) came after that which is described. There had to be a web 2.0 before anyone could recognize it as something different from what came before and name it.

Re:

[rainman_bc]

http://www.wikipedia.org/

Uhm, what about wikipedia is "Web 2.0" ?

Wikpedia uses no ajax, and uses standard http post methods, and generally is ( somewhat ) static content...

I thought Web 2.0 was supposed to be about user driven content using ajax and a load of other eye candy crap...

Re:

[The_Wilschon]

user driven content

I think you said it yourself right there. It is a wiki. Wikis are very much web 2.0. Wikipedia is web 2.0 whereas brittanica online is web 1.0. This comes straight from Tim O'Reilly (and I think he might well be considered the authoritative source here, since it is his buzzword after all), in the page I linked previously.

5 Web 2.0 URLs

[neelm]

flickr.com
technorati.com
digg.com
youtube.com
wikipedia.com

Not one of those sites provides it's own content - all content is users generated "for free". Every one of those sites allow you to publish the content on your own site "for free". You can keep up to date with new content without visiting the sites "for free".

If you don't understand the difference between this and nytimes-registered-users-only content, then it's no surprise you don't get the difference between the old web and the direction the web is

Re:

[Citizen of Earth]

The job market pendulum has swung back to the side favoring employers since 2001 or so with hundreds of applications being thown at every single position.

Your theory doesn't seem to account for the recent record-low levels of unemployment. High-skill tech jobs have always gone unfilled.

Re:I hope Web 2.0 is another bubble

[Euler]

Low unemployment does not mean high numbers of people employed. People move to other geographic areas, other careers, retire early, or stop looking for work. I live in a city that has 'improving' unemployment numbers. But that is because tens of thousands of people have left the area. Actual employment numbers have not increased.

High-skill jobs do go unfilled because the requirements to fill the job are unrealistic. i.e. someone with 10 years experience in .Net with a master's degree who will work for under $40k per year. If the job really needed to be filled, the market would make it happen by paying the right price.

Re:

[Tiro]

Good luck finding someone with ten years experience with .Net

Re:

[nuzak]

Tim O'Reilly. Go "thank" him for that next time you see him.

Re:

[KillerCow]

Seriously .. nobody really knows what "web 2.0" is. In my head, it basically consists of:

- google / gmail
- wikipedia
- blogs
- youtube
- maps.google.com

A web 2.0 site is one where the users provide the content.

Google is not [it's just a search engine].
Gmail is arguable, but would likely fall into the "not" category.
Wiki is.
Blogs are not (unless the main draw is the comments, ala Slashdot), but blogging sites (blogger, livejournal) are.
Y