When Rajesh Jain sold off his online property (IndiaWorld) for Rs.500 crores to Sify in late 1999, lots of folks took the deal as a sign of beginning of the great Internet boom. In hindsight, the deal proved to actually represent the end – with no one else making remotely close to that kind of money in the Indian Internet space. Now, it looks like Google’s buyout of YouTube is a signal of end of the Web 2.0 hype cycle (“Bubble 2.0”)
TheDeal.com reports how 2007 has begun to witness emergence if trouble at “some big-money Web 2.0 troubles” (as against the bootstrapped start-ups).
Online video startup Guba is apparently on the block after its CEO resigned last month, according to GigaOm. This comes after Accel and Benchmark-backed MetaCafe’s M&A travails. Browster, a browser startup supported with $5.8 million in first round funding from Advanced Technology Ventures, Vanguard Ventures and First Round Capital, has shut its web site down and refused to explain why. Not usually a good sign. FilmLoop, a slideshow startup that raised $7 million in first round funding last year from ComVentures, Garage Technology Ventures and GlobeSpan Capital Partners, has cut staff after failing to find a buyer, according to TechCrunch.
Which startups are next to fail? Odds are good that any advertising-based Web 2.0 startup you name is a candidate.
Plus, as KPCB’s Randy Komisar points out in his interview to Venturebeat, the firm is largely staying away from Web 2.0 companies.
Web 2.0 can get pretty speculative– where you throw a party, and if people come, you get Google to monetize it for you [with Google’s Adsense ads]. Every so often a YouTube happens, and that really stokes the fire – some would-be entrepreneurs get the impression, to quote Dire Straits, that the “money is for nothin, and the chicks for free”.
I’m looking for more fundamental innovations. I’m less interested in the content and media fallout. There are no strong barriers to entry in Web 2.0.
…I’m not sure how long YouTube would have remained an independent business had they not been bought by Google. Google has an efficient search engine to monetize large audiences. If you’re creating Web 2.0 products and media, its tough to build anything of sufficient scale to remain independent — you are more likely to end up being a feature on Google, Microsoft or Yahoo. Google bought YouTube because they’re interested in where people are spending time online, and because they didn’t want anyone else to buy it
Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.
I think Randy Komisar’s skepticism is a bit overdone. Google’s effective monetization of large audiences is precisely what is fueling the Web 2.0 boom. Worrying that everything ends up as a feature on Google or Yahoo is the same argument people used to make about Microsoft and barriers to entry. There’s always room for innovation, and Google, Yahoo or anyone else will never have a monopoly on that.
You are absolutely right Rahul however I certainly respect Arun points of view that Web2.0 has no barriers to entry. But hey, that’s the beauty. Open source has matured so that there is a tyrue reduction of barriers to entry and an entrepreneur has no limitations to creativity, no limitations/barriers to technology. Now that the guitar is built, all of us have access to make our own tunes and let the one that makes the sweetest tune get rewarded. Living in a world of barriers is not good in the long run. power your people with all the great technologies and that is exactly what is happeniong. As a matter of fact Richard Stallman’s fundamentals are absolutely right. free speech, not free beer; free software not free developers.
I believe this is just the beginning of an extremely big wave. I believe this is the beginnking of the bubble2.0. 2006 saw largest number of vc funding i.e. 24.75B; highest investment since 2001. This is an upward trend. Look at 101 or 237, it is packed these days, engineers are in high demand; everyone is hiring and the economy is booming. Garage has cut staff because Garage has yet to find a super star Guy is perhaps more money off his books than his ventures. But that is not a good example. Vinod has started his own VC arm Khosla Ventures and the winners are marching strong where as the weak ones are getting replaced with new fresh blood.
Interesting post to read but how could the collapse be coming when more and more consumers around the world are just now starting to use the Web2.0 companies and their clean functionality? What these new companies do however is threaten the existing structure hence the real collapse about to come. Innovation is a real threat to many but, currently, not to consumers or thrifty investors.