Words by Lorna Li, photos by Brian Caldwell
It was 2001, but I remember the day as if it were yesterday. We were the last in the office, junior inside sales reps working late, trying to dig up more leads in order to keep our boutique software startup from going under.
Perhaps we should have already seen the writing on the wall – all our top level execs had bailed, employees were being told to go on vacation, and the fact that our offices were located next to the rotting carcass of Pets.com seemed like exceedingly bad feng shui.
Suddenly, our Director of Western Region sales shrieks,
“Oh my God! ITS NAKED HOMELESS DUMPSTER SEX!!!”
We all run to the window overlooking our brick Soma alleyway. Sure enough, just 2 stories below, a homeless couple groped at each other from behind a dumpster – the woman seizing the unbuttoned shirt of her partner, who clung, pantless, to his shopping cart for balance, oblivious to the onlookers above.
I went home that evening unshakeably perturbed. The next day, our entire department was laid off. Within months, our company was officially dead.
Rumors from the SF Bay Web 2.0 Cocktail Circuit
It seems like 1999. There is an endless stream of tech parties going on in the SF Bay Area. And amidst all the frenetic partying, murmurings about the Web 2.0 bubble and its impending “pop”. And yet, a significant (and perhaps deluded?) army of believers maintain that we are not in a tech bubble at all.
The Internet industry is definitely booming. Coined the Web 2.0 revolution, the Internet has been transformed by lightweight and highly compatible technologies with an architecture of participation that have allowed entrepreneurs a very low cost of entry and an equally low cost of scaling. And everyone seems to want to get in on it.
According to research firm VentureOne, almost $500 million in venture-capital money was pumped into Web 2.0 companies during the first nine months of 2006 – 3 times more money received by tech startups over the previous year.
But is it a bubble, or is it “effervescence”? Certainly, there are some similarities between the current “Web 2.0 bubble” and the Web 1.0 bubble that burst in 2000. Sites have blossomed out of nowhere and quickly faded. Unknown, cash-flow negative tech startups are snapped up for shocking amounts of cash. As in 2000, there seems to be a lot of investors looking to fund Internet startups, cheap access to capital, relaxed screening mechanisms, and near-identical companies being funded.
But this time, we have not witnessed a lineup of blockbuster Internet IPOs. The public markets are not adding more fuel to the fire by betting on unproven business models as they did during the Web 1.0 bubble. Only one Web deal (Google’s purchase of YouTube) was valued at more than $1 billion in the past year. Which brings up the critical question – are the Web 2.0 companies that are being funded somehow more stable than the companies funded in 2000?
Bubble or no bubble – It’s a hot debate. But rather than speculating, perhaps it’s time for us to look up from our prawn cocktails, take a cold hard look at all the signs around us, and ask ourselves…
Is the universe already presenting us with the indisputable evidence that, indeed, the party is almost over?
Top 5 Reasons You Know You’re in a Tech Bubble – read on!
5) You don’t have to pay for groceries during the week because you can just hop around to free conferences, startup launch parties and Web 2.0 meetups.
When SF Beta moved up from the dive Mission bar Shine Lounge to serving hot buffets and giving out party favors at the trendy, more respectable 111 Minna Gallery, it was very bub.blicio.us indeed.
4) You start hearing bad poetry written by startup founders at tech events, such as this limerick by the founders of Guba.
There once was a girl from Cuba
A band geek who played the tuba
But her skin cleared up
She bought herself a C cup
Now she shows off her tatas on Guba.
Hats off to Josh Felser and Dave Samuel of Grouper Networks for their epic ballad about their startup’s birth and recent $65M sale to Sony:
Justin.tv’s theme song (from Saturday March 17 11:02pm) was so bad it made me cringe.
3) Frank Chu, 12 Galaxies starts showing up at your tech parties.
Frank Chu is a San Francisco legend, a solitary picket-sign-carrying protester who has demonstrated 7 days a week for over 10 years against various US presidents and multinational corporations.
I attempted to have a conversation with Frank Chu and found him to be largely incoherent.
Never heard of Frank Chu? He’s been covered by the SF Chronicle, ABC news, CBS, and many other mainstream media channels.
Check out Frank Chu on Wikipedia or the online documentary about the life of Frank Chu, ’cause, heck, I can’t explain it.
2) You witness naked, homeless dumpster sex outside the windows of your failing Soma startup.
Need I say more?
1) The number one sign that we are most definitely in a technology bubble…
Justin.tv rises to stardom.
Everywhere I go, it’s all about Justin Kan, a previously unknown dude with a camcorder permanently strapped to his head, intent on broadcasting his life 24/7 over the internet for the rest of his life.
He’s been featured on Current TV, SF Chronicle, the Today Show, MTV, and everywhere in the blogosphere. The tech sector’s fascination with Justin Kan reminds of 1994, when the mainstream media was obsessed with OJ Simpson.
Though I hate to admit it, I find myself strangely compelled by Justin’s life. I ponder how being thus wired affects his romantic life and whether he’ll also film himself having sex.
Don’t get me wrong. Though I find the phenomenon bizarre, I find Justin Kan to be a nice guy and respect his gutsiness for pulling this off.
Justin.tv is very bub.blicio.us.
The Web 2.0 Graveyard – the Dead and the Dying
The bubble hasn’t officially popped, but there seems to be evidence that it is “oozing” as the list of dead and dying companies grows.
Audioblogger
Bitpass
Browster
FilmLoop
Findory
Google Answers
Insider Pages
Judy’s Book
Jobster
LiveLocker
Odeo
Peerflix
Performancing
RawSugar
Commentary from the Web 2.0 Party Peanut Gallery
THE BUB.BLICIO.US
You know you’re in a bubble because:
“…you don’t have to pay for groceries during the week because you can just hop around to free conferences, startup launch parties and web 2.0 meetups.
…you have a popular blog called bub.blicio.us that gets incredible hits from all over the world everyday
…startups are actively seeking funding rather than holding out
…2.0 founders finally buy a car
…2.0 execs buy a house
…new web startups make a run at IPO”
Brian Solis
Founder & President
Future Works - public relations, social media, and new media marketing.
“I think we are in a bubble, any my best indicator for that is justin.tv – a guy with a videocamera strapped to his head for the rest of his life (think Truman Show) who is out raising money…”
Naval Ravikant
Chairman
Vast.com – the world’s widest, deepest, freshest and cleanest database of classified ads.
“One real sign we are in a bubble – So many new companies launching every day that we are all drowning in the noise…lot’s of good ideas are simply getting missed for lack of attention.
Too many new product launches creates noise that we must filter before we can judge them. More launches = more noise and our filters become less efficient. The more “successful” our economy is, the more launches, the greater the noise. So the newest companies are not getting the same amount of attention simply because our attention must be split into finer and finer slices of time that can be dedicated to filter new ideas. The more new ideas that are out “in the wild” pre-mass-adoption-tipping-point, the greater the noise, so individual companies must fight harder and harder for attention. Eventually there must be a super-saturated moment, mustn’t there? If this analysis rings true then that super-saturated moment might coincide with a big “pop” as our economy stumbles.”
Brian Caldwell
bub.blicio.us photographer
“Everyone keeps talking about the Web 2.0 bubble and whether it’s going to burst.”
Dale Cook
CEO
glueNOTE – Create notes with optionally attached files via the web, email, MS Office applications, desktop, browser plugins, voice and text messaging.
THE EFFERVESCENTS
“Bubble? I’m not sure I’d call the current upswing a bubble. There’s been a lot of investment in the web, but unlike 1997-2000 there haven’t been many avenues for exits (very few acquisitions and very few ipo’s). If casual stock investors start to go crazy for revenue loosing internet companies again, then I’d call it a bubble, but right now it looks like we’re safe. I think we’ll see some carnage and a number of mergers next year.”
Sanford Barr
Chief Stirrer and Co-Founder
The STIRR Network – catalyzing entrepreneurial activity in the SF Bay Area and beyond by bringing together startups, founders, investors, and connectors.
“Are we in a bubble? Depends how you define bubble. Are people investing in hair-brained ideas? Yes. In droves? Arguably, but smaller droves than in bubble 1.0. Are these startups creating real value in the market? In many cases. Are there some silly valuations? Yes. Are there some sane valuations? Yes. Are people going to make real money doing real things? Yes. Are some people going to make ridiculous money on stupid ideas? Yes. Will the bubble burst, and leave lots of people who came to tech looking for money scrambling for jobs? Maybe. Will there be a soft landing? Probably more so than last time. Will there be a bubble 3.0? Yes. Real value is being created, and will continue being created. This time around, more value is being created by smaller teams, leveraging the work of others. (This results in way more efficiency than in bubble 1.0 .) Who wins? Lots of people. Who loses? People who invest carelessly, the clueless, and the occasional smart or careful person who was in the wrong place at the wrong time.
Remember that even in the depth of the bubble 1.0 crash, the tech sector was way larger than it was in 1993, at the dawn of the commercial Internet. People forget that one. So is this a bubble? Sure, by many measures, but it’s a bubble on a sustainable long-term upward trend. There will be dips in places, even some big, multi-year contractions every now and then, but there’s still a lot of value to be built out there.”
Ian McFarland
Principal, VP Technology
Pivotal Labs, Inc.
“I don’t think we are. Look at Battelle’s piece on Building a
Better Boom in the NYTimes.
But if we slip into a bubble we would see huge, dumb investments into
dozens of companies that have no business model that make sense. What
we are seeing right now are small investments by reasonabl investors
into promising start-ups.”
Stowe Boyd
CEO
Blue Whale Labs - strategic consulting, design and development for innovative social applications.
Stowe Boyd’s Blog
“Not in the video space…People are watching 50 times as much video online now as they were 18 months ago.
Podaddies does video advertising for this segment of the market. This part of the tub has no bubbles, the water is warm and rising. Not only is this not a fad, it’s an important social phenomenon which is altering the way important segments of the population socialize, create, learn, get news and consume entertainment – and this sea of change creates new service economies, jobs and ways of doing business. It’s an area thats changing quickly to be sure, but it’s too full of reality to ever pop.”
Nate Pagel
CEO
Podaddies – a next generation ad network focused on solutions that monetize online video, UGC, P2P, and podcasts.
“I think we are actually in a “bubblet”, because there is a rush of founders and people trying to get into it, but the VC’s are still shy about dumping money and the average Joe is making fun of us. Web 2.0 has a bad rap, but that’s like looking at a larvae and saying, you call that a butterfly?”
Lisa Padilla
Editor / Producer
Information Colony
Got some funny reasons to add to our list? Please share your thoughts and opinions about the Web 2.0 Bubble.
Sources:
The Web 2.0 Bubble – Why the social-media revolution will go out with a whimper
Is ‘Web 2.0′ Another Bubble?
Rising Dead Pool Indicates Web 2.0 Bubble is Popping
Web 2.0 bubble bursting: Peerflix cuts workforce, carnage mounting elsewhere
Bubble 2.0
The Web 2.0 Entrepreneur Bubble
Building a Better Boom
lornali lorna+li briancaldwell brian+caldwell web 2.0 bubble web+2.0 web+2.0+bubble technology+bubble tech+bubble 1.0 web+1.0+bubble sf bay tech parties
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We’re in a bubblet (as someone else called it). If you think we’re in a full-on bubble, you have forgotten what the original bubble was: there were lots of companies, but not a lot of money. Zoom forward 10 years, and we have a whole new generation (mainly Generation Y if you’re into dividing things up) which has come of age and is not afraid of the ‘net. This is one of the reasons Google can produce income in the billions.
And Google is one of the reasons this isn’t a bubble: we have proof that you can make a lot of money on the internet. Build an audience, and marketers (the smart ones, not the MBA dolts who flew web 1.0 into the hill) will figure out how to advertise to them. Hell, a lot of the audience won’t even be annoyed.
Bubble, schmubble. If people are spending real money on a consistent basis, there is no bubble.
As unlikely as it seems from the outset, I think traditional media companies (TMC) will ultimately rule the web 2.0/New Media space. TMCs will surely become the next VCs.
This article is just perfect!
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