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Bubble 2.0? I just don’t see it

August 1st, 2007 by Dave Cole

Maybe it’s a case of not being able to see the forest for the trees, but after reading PC Magazine’s John C. Dvorak’s article titled Bubble 2.0 Coming Soon, I just had to wipe the dust off my Revenews account and respond.

Truth be told, I can see much of where he’s coming from. He’s been involved in technology for a great deal longer than I have, so he obviously has some perspective on the range of ups and downs technology has experienced, which he likens back to the days of software wars between spreadsheet and word processor developers. Of course, the easiest parallel to draw is the one fresh in many of our minds - the 1999-2001 “dot-bust”. Dvorak accurately represents the concept of what the bubble and subsequent market detonation really was about - failed eCommerce promises. However, he also states:

Every article in every newspaper in the country parroted the litany as to how you’d be out of business in a year or two if you were not present on the Web in a big way. Of course, this was all crap.

While it’s true that there aren’t many companies that are literally out of business because of the web (Good Guys and Tower Records easily come to mind), it would be almost impossible not to find a major company - or even a tiny one - that doesn’t have a web presence.

However, I wanted to steer away from what might or might not have been the bubbles of the past and focus on the “bubble 2.0″ of the near-future.

Neo-Social Networking. Dvorak claims that “This scene is totally out of control and will contribute to the collapse for sure.” I tend to agree that there are possibly too many companies that feel compelled to “socially network” what doesn’t really need to be, but fundamentally it doesn’t appear that social networks will fail more than they’ll never take off. Even in the social networking world, the larger platforms like LinkedIn and Facebook appear more likely to be acquisition targets for established players rather than IPO-ready companies. We’re already seeing a cooling and fragmenting within the social network world as well - Myspace isn’t growing as quickly as it used to, and relative newcomers to the field such as Meetup and Yelp have found success in serving a specific aspect of social networking. The methodologies and technologies involved in building a social network are straightforward, and appreciated by hundreds of millions of people worldwide. Some “social networks” might not take off, but it seems unlikely that social networks will fade away.

Video Mania This is actually related to Dvorak’s 3rd point, which is basically “Consumer Generated Stuff“. Consumers today have numerous ways to be compensated for their generated content, and most video sites, as well as article sites, podcasting sites, etc., take this in to account when structuring their compensation of the consumers. In some instances consumers will flat out revolt, such as Digg’s spectacular HD DVD debacle - but to say that “Video Mania” (which, Dvorak mentioned as a hot item from 2006) will cause some sort of bubble to collapse just doesn’t quite register. I will concede however that online video is still experiencing growing pains - specifically those that deal with copyright. Just like music is still coming to terms with how to distribute and profit in the age of wise crowds, tipping points, and long tails, so now are major TV and movie production companies. Some sites will probably be buried in lawsuits, but the big ones will continue to entertain us, 320 pixels at a time.

Mobile Everything Oh, come on. This has been the joke of every ad:tech I’ve attended. Of course mobile is someday going to hit home - and no, the iPhone isn’t close to getting us there. But some ubiquitous device will eventually be in our pocket that will solve all our technological problems. If America could get to the level that Korea or Japan is at in terms of reliance on cell phones and simplicity of features, then maybe we’ll be ready for a mobile-boom (filling a soon-to-be-bustable mobile “bubble”). With the exception of Twitter, mobile isn’t even that much a part of the “Web 2.0″ dialogue.

Ad-Leveraged Search, Widgets, Toolbars, and other Web 2.0 detours. Okay, we see eye-to-eye on this topic. These elements of Web 2.0 aren’t much more than simply extensions of the current trends, and even in my optimism I can’t see anyone doing anything specifically exciting. If it happens, someone let me know - perhaps we can have a “Widget Bubble”.

Mr. Dvorak wraps up his commentary about the “Bubble 2.0″ with:

You can come up with your own theories about the next collapse. Your guess as to the cause will be as good as mine. All I can tell you is that it’s a sure thing.

… yet he doesn’t, at any time, really specify what the bubble is and the assumed “burst” will do. After talking to some colleagues in the industry, it appears that investors are still skittish from the original Web 1.0 days, and seek out companies that are profitable, with sound leadership, core competencies, and long term aspirations. Even then the money going in to Web 2.0 ventures still pales in comparison to the irrational exuberance of the late ’90’s. And perhaps most importantly, the Web 2.0 isn’t significantly affecting the mainstream American investor like it did then. We’re not seeing IPO’s every other week for companies that aren’t even sure themselves what they’re doing.

I agree that there may be some consolidation to come, especially in the social networking realm. And of course, several startups will fail. But if you take a look at where Web 2.0 is taking us, things seem to be running at a relatively smooth clip. There’s no “sure thing” about this bubble Dvorak’s invented, and there’s no reason to believe that the next bust is right around the corner.

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