Media
Cool gizmo? Yes. Fun? Yes. Business? No.
Update 2:
Greg Linden has said he is no longer going to be maintaining Findory.com, his personalized-news recommendation service, and Richard MacManus over at Read/Write Web says that Talkr is looking to be acquired.
Update:
The Dead Pool rumour mill continues — Mike Arrington says there are reports that Insider Pages, a Web 2.0 recommendation site, has laid off as many as two-thirds of its staff. And Tom Evslin has some advice for Web 2.0 companies: in a nutshell, it may take more money now to run a startup, rather than less.
Original post:
Nothing gets the New Year off to a rousing start like a bunch of failing Web 2.0 companies, I always say. And we certainly seem to have a fresh crop: Peerflix (the DVD-trading company) is laying off staff, and so is Jobster (social-networking jobs site); GUBA (Web video) is shedding executives like rats from a sinking ship; FilmLoop (photo slideshow software) is struggling and Browster (browser search plugin) has apparently gone under.
What makes these kinds of failures a little awkward, of course, is that investors have plowed some handsome sums of money into these companies. FilmLoop raised about $7-million not long ago, and Browster raised about $5.8-million about a year ago. It’s true that as Don Dodge says none of these company went public and sucked money out of gullible investors (unlike the last bubble), but still. Perhaps whoever lost it on FilmLoop made it on some other dot-com. That would be fitting.
Mike Arrington has a long treatise on the topic of Bubble 2.0, in which he notes that regardless of which segment of the Web you look at — photo-sharing, video-sharing, video search, Q&A sites, Ajax start pages, social-shopping services — there are too many companies chasing the same pie. As my friend Paul Kedrosky said at mesh last year, the great thing about Web 2.0 is the low barriers to entry, but that also means you can have dozens of competitors in the blink of an eye.
For services like FilmLoop, two things stand out for me: The first is that so many of these Web 2.0 “businesses,” like Browser, are cool features or gizmos but not necessarily businesses. And the second, as expressed by many commenters at Mike’s post on FilmLoop, is what the heck is a Web 2.0 startup without any real business model doing with $7-million and 30 employees?
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Mathew, I think you heard me stand up and say this on several occasions during Mesh last year - and several more times on this blog since then. I'm glad to see the masses (not you) are starting to see the one severe weakness in Web 2.0 that I saw from the outset - Too much cool, not enough cash
I was baffled at the fact that an overwhelming number of W20 "companies" had neither revenue, nor a business model in site. And yet, investors and geeks were falling all over themselves to praise them. Common sense went out the window and now investment dollars are following.
Let's hope 2007 will be the year of boring, money-making W20 companies that attract investment and expand their customer base. Now that would be something.
Best,
George
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Instant gratification vs long term viability?
I haven't met many developers or web entrepreneurs yet that won't jump at sex appeal rather than getting down to serious business.
This bodes well only for big established entities working at getting bigger, and that's usually where the best talent ends up.
One of the missing links, in my opinion, is long term investors and real merchant bankers, a breed that doesn't really exist any longer. Such parties could reappear, but not unless serious developers do.
Vera
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A big component of sex appeal most often is "easy". Build something fast and cool, then sit back to see if it catches on to become the next best thing. I can tell you I've got 5-6 such ideas but I know that - short of becoming that one YouTube in a million -none of them will generate any meaningful wealth and waste most of my time.
Second, this doesn't bode well for big established entities. Freshbooks is a small business; AGORACOM is a small business. The difference is that both of us decided to use W20 to build viable applications. I started out in my basement and now occupy 2,000 sq ft on the 10th floor. I'm sure Mike McDerment has similar roots.
The principals of entrepreneurship are well established and don't change just because software is free and hardware is cheap. One of those principals is that you start out at the bottom and sweat it out with tremendously hard work in hopes of gaining your piece of the pie. In some instances, such companies turn out to be goliaths themselves. This principal is as true today as it was 100 years ago.
Having said that, becoming a goliath isn't necessary to achieve success. It is another well established fact that small business is the engine that drives the economy. AGORACOM may never become Goldman Sachs and Freshbooks may never become Quicken - but we'll probably be around for several years and feed both our families and those of our employees in the process. That works just fine for me.
The problem is that we've spawned a generation of coders/techies that are building for the billion dollar deal - and that is a recipe for disaster.
People are finally starting to wake up to the fact that sexy isn't a business model. It's just luck. In the long run, sweaty beats sexy hands down. Hopefully, we can wake up techies to that fact.
Best,
George
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Not too sure that we disagree, unless I posit that maybe sweaty can be sexy. :)
I agree with your definition of one meaning of sex appeal in the web development world. I\'d like to add that, as a woman in my 40s, I\'m also acutely aware of a particular skew in most techie/developer points of view. What is cool to a usually male geek who is typically 25-35 years of age tends to represent only a fraction of the range of things considered cool by all of us. That point of view is even more esoteric in terms of day to day reality as expressed by the typical tech investor, usually VC.
As far as the would be entrepreneur who\'s rolling the dice and hoping to hit a hot fad, your reference to real entrepreneurship being something different and involving a long term view and hard work sounds in line with my own experience.
I\'ll add a bit of definition to the term \'big established entities\' as used in my earlier post. Using the term entities instead of businesses was deliberate, as I see governments and government agencies as important players in the market demand for top tech talent. Power, after all, is headier than money by itself. Pharmaceuticals and other bio-med companies, as well as the media giants, are also important players, as much as Microsoft or HP.
I\'m grateful, always, to live in a society and economy that is driven by small business. In fact, I\'d venture that, if we could add up the real old fashioned profits being made by on the web (as distinct from over and via the internet), the total accruing to individuals and small businesses would exceed that being portrayed by the dot com operations funded by million dollar bills from VCs and the like. So your view point on real entrepreneurs and real start ups is one that I\'m in agreement on.
Having said that, I come from a couple of decades of urban real estate development experience, and tend to view the \'web\' as a \'place\' where a billion people spend time. The analogies are limited, since the first is concrete and the second fluid, but I still focus on things like infrastructure, major destinations, and the public trust, in my overview. The \'place\' may be different, but people aren\'t, and the communal efforts and processes required to create those larger central things are not easily generated unless motivated by money and power.
The current generation of coders and techies may be, as you say, fixated on the billion dollar deal (but only if it\'s sexy to them). I\'m thinking that a number of the best of them are ending up opting for a protected environment, meaning that they can spend all their time doing what they love and are good at with their peers. That comes with an impressive enough salary and the freedom from the annoyances of dealing with non-techies and other realities. This is the phenomenon that I believe favors large entities over the public and general community. Unlike in RL, it is harder for us to comprehend what is missing or possible here.
Vera
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