It was fun to read Jeffrey Zeldman’s recent rant against the “Web 2.0” hype (picked up via Roger). In fact, Web 2.0 is, perhaps, one of the favorite jokes in the Microsoft camp. According to my calculations the Web is in version 10.0 or so by now. Hmm… some folks have been asleep for too long.
Some start-ups, poised to revolutionize the web with yet another “social tagging” or “collaborative” service, prefer to “keep it real”, yet would gladly take VC money. I think this is how the buzzword game of “Web 2.0” began—to con venture capitalists into throwing money on shady enterprises like it’s ’99. Just make sure you also have “Ajax” mentioned in the PowerPoint slides, and you’re good to go.
Here’s an interesting example from Red Herring:
Social networking site TagWorld, which debuted just three months ago, announced its first round of outside funding from Draper Fisher Jurvetson on Tuesday.
If you know anything about raising capital, three months is lightning fast. No one in the world can convince me that yet another social networking site has such revolutionizing business model that it absolutely needs millions of dollars to burn pronto. Keep reading.
TagWorld’s plan is to quickly incorporate new features. It recently bumped up the development schedule to push out photo and video features. Mr. Rifkin claims his site has one of the largest implementations on the Internet of AJAX (Asynchronous JavaScript and XML), which offers techniques for making web sites more responsive. He has a team of 30 engineers to back him up.
Three months since the release; no history of past performance (they don’t have a past); already burning cash on 30 developers; “largest implementations on the Internet of AJAX”… Ah, that’s the kicker. You’ve got your classic IT con.
Just yesterday Red Herring published another piece. How’s this?
Analogies to Flickr, the photo-sharing site bought by Yahoo last year, connote the community aspects of the prototypical “Web 2.0” product. The hopeful association is made so often by new Internet companies it has become a joke. ([Angel investor] Ms. Dyson acknowledged it was “a cheap and easy comparison.”)
Jason Zweig makes an interesting point in Benjamin Graham’s Intelligent Investor:
In two years from June 1960, through May 1962, more than 850 companies sold their stock to the public for the first time—an average of more than one per day. In late 1967 the IPO market heated up again; in 1969 an astonishing 781 new stocks were born. That oversupply helped create the bear markets of 1969 and 1973–1974. In 1974 the IPO market was so dead that only nine stocks were created all year; 1975 saw only 14 stocks born. That undersupply, in turn, helped feed the bull market of the 1980s, when roughly 4,000 new stocks flooded the market—helping to trigger the overenthusiasm that led to the 1987 crash. Then the cycle swung the other way again as IPOs dried up in 1988–1990. That shortage contributed to the bull market of the 1990s–and, right on cue, Wall Street got back into the business of creating new stocks, cranking out nearly 5,000 IPOs. Then, after the bubble burst in 2000, only 88 IPOs were issued in 2001—the lowest annual total since 1979. In every case, the public has gotten burned on IPOs, has stayed away for at least two years, but has always returned for another scalding. For as long as stock markets have existed, investors have gone through this manic-depressive cycle.
Although this remark is about new stock offerings, the history applies to the IT industry in general. What’s important here is the pattern. If people in the know are right in their predictions, “2006 is shaping up to be the busiest year for new issues since before the tech crash.”
The signs are all there. For example, Google buys a company with no shipped product (love the “Web 2.0’ish buyout” reference); money is thrown at Ajax-powered tagging, podcasting, social collaboration eco systems, and so forth. And the timing is right—several years for amnesia to settle in.
Kick back and enjoy the show.
Update: Russell Beattie has written a hilarious post WTF 2.0.
