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Web 2.Uh-Oh?

Posted by: Rob Hof on September 18, 2007

Fred Wilson, a VC who has sometimes thrown cold water on the notion that there’s a new bubble in Web investment, is now getting worried that a downturn is coming that will hit the Web as well as the rest of the economy. He seems to feel it in his bones:

My mind is trained to expect headwinds soon. I don’t know that we will, but I can’t help but expect them. … Right now in web tech, we’ve got a huge supply of new companies and a huge demand to invest in them. That’s not sustainable forever.

And we are getting to the point that some web 2.0 companies are going to start failing. VCs will keep bad investments alive for a while, but they won’t pour good money after bad forever. We’ve seen some web 2.0 companies close their doors and we are going to see more.

Finally there’s the question of what’s next? Is it semantic web? Programmable web? Social web? Yes, yes, and yes. But we are still seeing a lot of me too companies, slight twists on ideas that are now five years old. We are not yet seeing boldly new ideas, at least not enough of them to say we are now in web 3.0.

Which brings me to TechCrunch40, the conference where I spent most of the last couple of days hearing pitches from several dozen Web startups. Despite some skepticism out there, I think many of them have interesting ideas, from Mint’s easy money management to Xobni’s emailbox management tools to Ponoko’s personal manufacturing platform. I don’t know if their business models or management teams will hold up—who can possibly know?—but at least they’re not all me-too ventures. The hit rate on my attention was a lot higher than what I get in my email box, that’s for sure. And I know I’ll be keeping an eye on more than a few of these.

But not a few others, including some in the “Demo Pit” at TechCrunch40 who didn’t make the top-tier cut, seemed derivative, even a little strange, and in some cases downright desperate in their marketing. One dating site had a woman in hot pants standing in front of their demo, and gave out condoms to attendees. Maybe it was supposed to be ironic, but I dunno.

Then there’s Snoozester, which offers free wakeup calls, and, “the first sleep and wake up social networking site, where your friends’ alarm messages wake you up.” (I think these Web 2.0 folks need to get some shut-eye.)

Yet another company,, described as a social networking platform focused on “sexy models and beautiful photography” and one of the presenters at TechCrunch40, sent out an invitation to meet models at the conference, adding: “Journalists are encouraged to take photos.” Yeesh.

None of this talk should diminish the importance of the many startups at TechCrunch40 that are working hard to create something new, let alone groundbreaking services such as Facebook, Digg and Techmeme, Twitter, and a bunch of others. If there’s a bubble in Web 2.0, some great, useful new services are nonetheless emerging out of the froth.

It’s just that when you start seeing scantily clad women at demos, tacky tchotchkes, and buzzwords tripping over each other in press release after press release, it’s hard to disagree with Fred that there’s a reckoning ahead. It won’t be a surprise if investors start shying away from funding everything in sight. And it probably won’t be a bad thing, either.

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Reader Comments

Rex Hammock

September 19, 2007 09:41 AM

As I've said before, "bubbles" and "busts" are phenomena of financial markets and investor expectations. Unlike 2000, "widows and orphans" are not investing in publicly-traded startups with no revenue -- it's "VC," friends, and founders money at stake. VCs don't deserve sympathy for "busts" -- indeed, I think that's part of the point of Fred's post. I would think the good VCs like it when a sector goes out of favor and the amateurs clear out. For the smart guys, I would think it's a good sign when the spokes models show up to take folks eyes off the really good opportunities. But then, what do I know? I'm just a user of this stuff, not an investor or someone out raising money.

francine hardaway

September 19, 2007 10:09 AM

I didn't go, but I listened to Tech Crunch 40 live. I think Jason and Mike got carried away. They could have had 20 really fascinating ideas, and instead they had a smorgasbord. It was like those big buffet lines where the selection is large, but no individual dish is good...I guess Mint is is okay, but I had tried it before and it involves a lot of work aggregating all that info.

Maria Colacurcio

September 19, 2007 02:43 PM

I like to call it 'Wait 2.0' because I think now that the initial love affair with Web 2.0 is over, investors as well as the general public are simply waiting to see which companies/technologies rise to the top and which flounder. I don't think this is a bust per se, just a wait-and-see period. John Cook's noted the Web 2.0 investment flatline in a recent article on his blog (
The interesting thing (which is vastly different from the 'bubble' of the late 90s) is that companies can stick around much longer these days due to SaaS models, cheap infrastructure and fewer employees. So the wait to see who comes out on top may be longer than we think.

Sara Jarvis

September 20, 2007 04:18 AM

Yeah, that Social Alarm Clock sounds fun, but I dont have a computer in my room.

Though my niece in her college dorm room Im sure would enjoy being awakened by her friends' voicemails

Robert Kuntz

May 27, 2008 01:12 AM

Well, I have to agree. Though everyone threw around the Web 2.0 term, only a handful of sites really made it big. I do though like the idea of upgrading the entire internet to Web 2.0 - every website at a click of a button. Now that is a novel idea. Hmmm...who came up with that? Web2Upgrade...

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