Froth Central at Web 2.0?

Posted by: Rob Hof on October 5, 2005

It’s so crowded in the introductory workshops at the sold-out Web 2.0 conference today that people are getting turned away from the conference rooms. That’s only encouraging the networking and dealmaking in the hallways of the Argent Hotel here in San Francisco. The main word I’m hearing? Froth. Both entrepreneurs and VCs tell me things are getting crazy again, especially in consumer Internet ventures. Things have been heating up for some time, but it appears they’re reaching a boiling point. “It’s getting too frothy,” says Peter Rip of Leapfrog Ventures. “All these Web 2.0 companies are like mushrooms. There’s a feeding frenzy when they pop up.”

Not a good sign, frankly. People sure have short memories.

That said, it sure is exciting to see all these new ideas popping. Good thing I don’t get to put money into them.

Reader Comments

Justin Gardner

October 5, 2005 4:52 PM

"Not a good sign, frankly. People sure have short memories."

Is it? Because frankly I think that most of the fly-by-nighters were weeded out long ago, and now the established players who aren't going away can choose who to work with and the VC can have a much clearer direction about what those startups look like.

In other words, I'm not seeing this story end nearly as badly (or badly at all) as the chapter that closed several years ago.

Thoughts?

Peter Rip

October 6, 2005 12:45 AM

Justin, you're right. It won't end "as badly" but that's mainly because there isn't an IPO market for these companies. The bubble IPO market hid everyone's mistakes, for a while. But the frenzy is definitely there and with the same 2-4 potential acquirers for all these companies, it can't end well.

Vic

October 6, 2005 8:14 AM

It's not all vaporware.
Check out http://roomity.com for example.
.V

Ken Yarmosh

October 7, 2005 1:05 AM

I am not as hopeful about what is happening.

I see few legit business models out there. I see some really cool tech innovations with little practical value. I see crowded spaces (consider social bookmarking), filled with lots of investments and little differentiation. I see the power players (Google, Yahoo!, eBay, and now AOL) trying to out do each other and spending big dollars to do it.

The big guys are now following a "me too" philosophy via their acquisitions. VCs seem to be doing the same via their investments. Everyone feels like they need a piece of the Web 2.0 pie. Are consumers and the market really demanding a $25 million investment in a blog network? Are they demanding a $2.6 billion for an Internet communications provider?

Is it fun and exciting? Sure. Is it worth the money? Not so sure.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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