Dot-com bust 2.0

Published on: February 28, 2006 by Paul Boag

At the recent geek dinner I attended, we had a heated debate about the current web 2.0 phenomena. I expressed some concern about the lack of a viable business case to support many of these sites. Well, apparently I am not alone in my concerns.

I first expressed my alarm back in November when I wrote a post on the subject. Since then the feeling that the current trend is not so much "web 2.0" as "dot com bust 2.0" has continued to grow. At the geek dinner, I expressed a concern that history was indeed repeating itself and that many web 2.0 companies relied too heavily on the fickle world of advertising to generate income. Surprisingly this created quite a lot of resistance with many people pointing out that some web 2.0 companies were indeed profitable. Although I had to concede that this was the case with some companies such as flickr.com, I still could not shake the feeling of deja vu I was experiencing.

It was therefore encouraging to read Russell Beattie's recent article entitled WTF 2.0. His article ends with the following statement:

But I really do think there should be a litmus test for new web apps launched from now on - something very basic and if they don't pass, they don't qualify for any buzz or linkage. It's a simple test: Will they take my credit card? That's it. I don't care if they have advertisers or sponsors or god knows what else, all I want to see is a place where I can type in my credit card for some service. Maybe it's a Pro account, maybe it's the main service after a trial, or maybe I don't get jack until I pony up the cash.

I couldn't agree more.

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Post by mjpwall on March 1, 2006 11:51 AM

Just thought I'd throw in this:

http://www.informationweek.com/story/showArticle.jhtml?articleID=180206472&cid=RSSfeed_IWK_News

How will this kind of patent affect the progress of web 2.0 or the web in general. it seems crazy to me.
Post by mjpwall on March 1, 2006 11:53 AM

http://www.informationweek.com/story/showArticle.jhtml?articleID=180206472&cid=RSSfeed_IWK_News

what do you think this kind of patent will do to the development of web 2.0 apps, or the web in general.
Post by Simon Griffiths on March 2, 2006 12:49 PM

I think that you are probably right in some ways, but I would regard the current crop of companies as 'trail blazers' in many ways.

We have used a flash web app on our site to help our client design racking systems, so there are real commercial applications, when the commercial world catches up.

If you look at AJAX apps., I can also think of many ways AJAX can be used in our site to help our customers find things easier. As for registration forms, they all should be AJAX. Don't you hate that user name already taken thing!

Some sites do seem that they might struggle to make real money though. Digg is an example you always give. However the guys that designed digg did not originally design it to be more than a weekend project. They now face the difficult task of making money out of it. I am not sure how they will do this. There was a hint in TWIT that they were going to expand out of tech....hmm!!?
Post by Gregg on March 3, 2006 3:10 PM

I agree with you that there is a gold rush of sorts and many prospectors are destined to be trampled though there is a dramatic difference in this rush to tech and that is the consumer. Online advertising has grown leaps and bounds and with the threats to Television Advertising (Tivo, etc.) major brands are embracing the online outlet. More startups that support a well targeted online advertising structure may succeed just yet.

My 2.
Post by Alan Houser on March 23, 2006 1:00 PM

I thought this was a great *web 2.0* effort:
http://www.flickr.com/photo_zoom.gne?id=110355252&size=l
Post by Richard Quick on April 17, 2006 9:23 PM

"It's a simple test: Will they take my credit card?"

Google wouldn't have passed that test until fairly recently.

Also, there are plenty of sites that give you a chance to hand over money but still make no money .. they just never succeed in persuading anyone to give their credit card details.

I agree totally that most Web 2.0 companies are really Hype 2.0 companies in that they haven't figured out how they're going to make money.

However, looking back at Hype 1.0 ... Boo.com allowed you to give them money .. they even managed to persuade people to spend over $350,000 a week - and that despite having a sh*te site. The problem was the company had overheads of 20 times that amount.

There problem isn't exclusively limited to sites that have no idea how they're going to make money .. it's also down to companies that THINK they know how they're going to make money .. but are off the mark.

I certainly think that anyone that relies on advertising is destined to fail. Web advertising rates won't even cover your bandwidth let alone staffing and office costs. It's hard enough to keep a print magazine going using advertising revenue - it's virtually impossible to keep a website (whether editorial or not) going on advertising - at least at the moment.
Post by Jason on June 22, 2006 3:24 PM

I agree with a couple of the earlier comments.

These guys ARE trailblazers and what comes out of these initial offerings will determine how (and whether) web 2.0 sites will continue to grow.

We need these guys now, to work out all the kinks and come up with the money-making models for the future. Let's give them time. How long did it take for Google to finally figure it out?

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