Do not call it a bubble
It may seem tempting to draw parallels between the Web 2.0 boom and dot-com fury. But the numbers indicate that this is not 1999.
I spent the last week in Memphis, Tennessee, as far as possible from Silicon Valley. I was immersed in the Web 2.0 scene for almost a year, presenting more than 12 events in the past month alone, and I was so sick of it. Tired of small talk, constant presence at work, hunting for photos that will appear in someone else's blog the next day. I needed a rest.
Then I read an article by Michael Arrington, who returned back to 2005, when innovation was surrounded by zeal and solidarity. When new ideas were discussed for a hamburger with beer. Companies were created in residential premises. Now they are drawing millions from venture capital companies, although not everyone deserves it.
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Weak parallels
I understand him. I also remember the times before Google acquired YouTube for $ 1.65 billion. People did not create companies to sell Yahoo! or Google, but because they thought they had great ideas. There was less talk about the “exit strategy”, and more attention was paid to the joys of creating a project with friends and having a meager budget.
A sense of excitement gave rise to frivolity. This has never been more obvious than on April 16th on the night of the opening of the Web 2.0 Expo, when at least 5 parties were in full swing within a radius of several blocks in the South of Market area in San Francisco. The most expensive tickets were for the Netvibes “Universe Launch Party”. Everyone stood breathlessly.
I had such suspicions that most of those who were present at the party, and the hundreds that stood on the street, did not even know what Netvibes was. For information, Netvibes is a site that allows you to use the capabilities of third-party sites to organize your own home page.
Agree. I felt in 1999. But I would not like to draw parallels between what is happening now and what happened a few years ago, before the dot-com bubble exploded, as soon as you stop trusting your inner feelings, the comparison immediately disappears somewhere.
What is the difference?
Let's look at some of the most striking differences between today's Internet start-ups and dot-com.
Everything that is happening now in the new world of dot-com, it seems to me, does not make much sense. Everything will be corrected when companies that cannot make a business plan go to the bottom. Although it is, in any case, not very different from the usual business of Silicon Valley.
Chatter begins to frighten only when the consequences begin to spread. If all of these Web 2.0 companies go out of business, San Francisco losses will undoubtedly be high. Hordes of young and talented professionals will be left without work. Venture capitalists will lose money, but not all of their property. And we, of course, will not see anything similar to the 2-year recession, which dropped the NASDAQ figures from 5132.52 to less than 1200, dried retirement accounts and left thousands without work.
So why bite your elbows? Because in the past the blow fell very hard. Even a slight mention of this scares, and everything around reminds of it: parties, ghostly business models, talk not about incomes; young, self-confident CEOs without business skills. Nobody wants to believe again just to become fooled again and lose their job for the next year.
But it is precisely such moments that make Silicon Valley great. People do not fly here from all over the world or invest billions of dollars in Sand Hill Road just because smart people are sitting here, drinking beer, eating hamburgers and talking about their products. They do this because every 10 months or so, Silicon Valley generates a handful of the biggest in the world, the most exciting and change-seeking companies. And no matter how regrettable it may be, but it is not possible without a little hype, crowd effect, and even “massacre” on the way.
I spent the last week in Memphis, Tennessee, as far as possible from Silicon Valley. I was immersed in the Web 2.0 scene for almost a year, presenting more than 12 events in the past month alone, and I was so sick of it. Tired of small talk, constant presence at work, hunting for photos that will appear in someone else's blog the next day. I needed a rest.
Then I read an article by Michael Arrington, who returned back to 2005, when innovation was surrounded by zeal and solidarity. When new ideas were discussed for a hamburger with beer. Companies were created in residential premises. Now they are drawing millions from venture capital companies, although not everyone deserves it.
')
Weak parallels
I understand him. I also remember the times before Google acquired YouTube for $ 1.65 billion. People did not create companies to sell Yahoo! or Google, but because they thought they had great ideas. There was less talk about the “exit strategy”, and more attention was paid to the joys of creating a project with friends and having a meager budget.
A sense of excitement gave rise to frivolity. This has never been more obvious than on April 16th on the night of the opening of the Web 2.0 Expo, when at least 5 parties were in full swing within a radius of several blocks in the South of Market area in San Francisco. The most expensive tickets were for the Netvibes “Universe Launch Party”. Everyone stood breathlessly.
I had such suspicions that most of those who were present at the party, and the hundreds that stood on the street, did not even know what Netvibes was. For information, Netvibes is a site that allows you to use the capabilities of third-party sites to organize your own home page.
Agree. I felt in 1999. But I would not like to draw parallels between what is happening now and what happened a few years ago, before the dot-com bubble exploded, as soon as you stop trusting your inner feelings, the comparison immediately disappears somewhere.
What is the difference?
Let's look at some of the most striking differences between today's Internet start-ups and dot-com.
- IPO
We are not seeing a violent IPO offering, not only over the past few years, but also over a short period. Of course, Internet companies such as NetSuite are planning to sell their shares, and some others, like OpenTable.com, also plan, but in comparison with all companies that specialize in user content, social media and social networks - these are few.
Even Facebook, which received $ 1 billion from Yahoo !, do not plan to sell their shares until 2009. Let's just say, tomorrow Web 2.0 will not explode. Without an IPO, a financial “massacre” for companies and their investors is very limited. In 1999, 270 funded companies earned about $ 21 billion. Of course, they were not all dot-coms, but many appeared precisely because of this boom. Last year, 57 companies earned only 5.1 billion dollars. - Technological and market changes
In the US, 70% of the adult population use the Internet, and almost half of them use high-speed connections. In 2000 there were about 40%. Plus, creating a business is now cheaper; Thanks to free software and cheap Dell servers.
Web 2.0 projects promote themselves mainly through the Internet, rather than using expensive television advertising. Less need to change consumer behavior: more than half of young people in the United States use social networks, and more than 48 million Americans have posted materials on the network. Even if you add parties and t-shirts to your project, you still do not come close to the explosion of the late 90s. - Venture Capital Costs
In 2006, venture capitalists invested $ 850 million in Web 2.0 projects. The total figures have doubled since 2002, but on average the amount of transactions was about $ 5 million, and the average value was $ 6 million. For all investment categories, the average value was $ 18.5 million.
Now compare this figure with 34 billion investment in all industries. The so-called technology companies received only 1.28 billion dollars, if you add them up from 664 million dollars in the previous year. The average value of these companies was $ 7 million. The market for tech companies is almost empty, but in many cases it is very difficult to prove the consistency of the business model. And while statements that most experiments are taking place with the online market, and most social networks and social media businesses fail, are true - no one wonders why billions of ad dollars go online. Most of these investments will continue to fuel plans for Web 2.0 projects. - Acquisitions
Yes, many Web 2.0 companies are bought, but no one received more than $ 1 billion other than YouTube, and most of the companies buy for less than $ 100 million. This is not a bubble, this is the most effective innovation in the field of outsourcing for companies such as Google or Yahoo !, not the same as it was with Cisco, which for many years dominated the market of networks, routing and software technology.
In 2006, 336 invested companies were acquired in the amount of $ 16 billion. In 2000, fewer companies were acquired, but these 318 companies earned $ 68 billion.
Everything that is happening now in the new world of dot-com, it seems to me, does not make much sense. Everything will be corrected when companies that cannot make a business plan go to the bottom. Although it is, in any case, not very different from the usual business of Silicon Valley.
Chatter begins to frighten only when the consequences begin to spread. If all of these Web 2.0 companies go out of business, San Francisco losses will undoubtedly be high. Hordes of young and talented professionals will be left without work. Venture capitalists will lose money, but not all of their property. And we, of course, will not see anything similar to the 2-year recession, which dropped the NASDAQ figures from 5132.52 to less than 1200, dried retirement accounts and left thousands without work.
So why bite your elbows? Because in the past the blow fell very hard. Even a slight mention of this scares, and everything around reminds of it: parties, ghostly business models, talk not about incomes; young, self-confident CEOs without business skills. Nobody wants to believe again just to become fooled again and lose their job for the next year.
But it is precisely such moments that make Silicon Valley great. People do not fly here from all over the world or invest billions of dollars in Sand Hill Road just because smart people are sitting here, drinking beer, eating hamburgers and talking about their products. They do this because every 10 months or so, Silicon Valley generates a handful of the biggest in the world, the most exciting and change-seeking companies. And no matter how regrettable it may be, but it is not possible without a little hype, crowd effect, and even “massacre” on the way.
Source: https://habr.com/ru/post/31066/
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