October 2007 Archives

I didn't start this rumor -- you heard it here second.  Good job Chris. 

Bubble 2.0? Not.

Seems like every day there's yet another blogger claiming we are in a Web 2.0 bubble that's ready to burst.  Today, it's the New York Times.

Even if it looks like a bubble and it feels like a bubble,  is it really a bubble?

Maybe valuations are a bit frothy.  Maybe those crazy web ideas that get funded really don't have a business model.  Maybe we are all sucking on the tits of Google, and as soon as the milk (advertising) goes dry, it's all over.  Comparisons to the Internet bubble of yesteryear abound.

However, there is something fundamentally different about today's presumed bubble from the bubble of Web 1.0 -- size.  At the peak of the Internet bubble (1.0), it seemed like every other friend was working for a company that grew from start up to huge.  Ariba, CommerceOne, BroadVision, Excite, Siebel, Vignette, Yahoo....These companies were each worth 10's of billions of dollars.  I can easily name a dozen or more start ups that grew to this size.   Founders were worth billions and mortal employees were worth  10's if not 100's of millions.  Then there were the small companies  worth "only" 100's of millions or small billions -- Open Market, Marimba, Connect...seems like there was a hundred of these sized companies.   And of course, there were the juggernauts from a previous generation -- Microsft, Oracle, Intel, Sun....These companies had market caps grow to over $100B.  When the party finally ended in 2000 and we "hit bottom" (around 2002), hundreds of billions  of dollars were lost (and that's not including the losses of the huge behemoths).

Compare this to today.  Sure there's Google.  And the aQuantive, YouTube,  Skype deals (and a handful of others worth maybe a few billion and change) were phenomenal. But for the most part, the valuations of companies are  two to three orders of magnitude less (for the math challenged that's  the difference from say $20 million to $20 billion).

FaceBook?  The current darling and company valued at a rumored $15 billion? Didn't Tom Siebel make about that much for himself?  If you add up  the total valuation of all of the companies in the current bubble,  I think it  equals about the peak value of Ariba.  

So, when this "bubble" pops, we should only hear a wimpy hissing sound  where the lost fortunes will be on the order of  millions of dollars not billions.  The crying and whining might be as large as in Bubble 1.0,  but the fortunes lost (and the fortunes made by those that are taking  when the taking is good), will be a rounding error in comparison to yesteryear.

The wins and glory won't as big, and the losses won't be as painful this time around.  Let's not whine but recognize where we are at, and then get on with it.  Web 3 anyone?