A VC - Latest Comments in Tough Times Ahead For The Web?

Re: Tough Times Ahead For The Web?

Dorian Benkoil — Sat, 06 Oct 2007 18:32:26 -0000

So, you're saying at the technological forefront AND focusing on people? must a business really be at the forefront of technology? or just use it wisely with an innovative idea - regardless of whether it's technologically very innovative.

Re: Tough Times Ahead For The Web?

fredwilson — Fri, 05 Oct 2007 12:22:01 -0000

I posted my thoughts on that comment a while back

It might be dead and boring to mark, but not to me

Fred

Re: Tough Times Ahead For The Web?

JT — Fri, 05 Oct 2007 10:48:10 -0000

seek help now!

Re: Tough Times Ahead For The Web?

JT — Fri, 05 Oct 2007 10:46:46 -0000

(From interview in Portfolio Magazine)
Mark Cuban:
"We have reached a point of diminishing returns with today’s internet. The speed of broadband to your home won’t increase much more in the next five years than it has in the last five years. That is not enough to work as a platform for new levels of applications that will require much, much higher levels of bandwidth.

Think of it this way. Way back when, electricity changed the world. It was the platform for everything electronic that we do today. Do you get excited about electricity or is it just a utility? Maybe old people who remember the advent of electricity still get excited about it. No one else does.

The internet is in the same position today. It’s no longer an exciting platform for societal and business change. It’s a utility. It’s something that is exciting to people who remember the old days of the internet.

The only way to change that is to upgrade the platform for bandwidth transport across the country to a minimum of 1 gigabyte per second throughout to every home. At that point kids will come up with new and unique applications that we can’t imagine today. That’s when it becomes exciting. Until then, it’s dead and boring."

Re: Tough Times Ahead For The Web?

Alexander Ainslie (@AAinslie) — Sun, 23 Sep 2007 14:08:23 -0000

At the end of the day one has to have a recession proof revenue model. Everything else is window dressing!

Re: Tough Times Ahead For The Web?

alan p — Thu, 20 Sep 2007 07:23:24 -0000

Maybe it takes a shakeout to stop people funding the me-too ventures?

Re: Tough Times Ahead For The Web?

id — Wed, 19 Sep 2007 19:38:13 -0000

read this article a few days ago, your post made me think of it..
http://blog.wired.com/busin...

Re: Tough Times Ahead For The Web?

Bill Koslosky, MD — Wed, 19 Sep 2007 10:09:43 -0000

I think Web 2.0 is over. Anything really remarkable done because of it? Aren't social media, folksonomies, user-generated content completely played out? It's time to think about a better way:
http://billkosloskymd.typep...

Re: Tough Times Ahead For The Web?

Aruni — Wed, 19 Sep 2007 09:24:59 -0000

Well having founded one VC backed tech company that survived the last downturn and is still operating (I am no longer with the company). I think change is in the air. From my perspective as an entreprenuer, downturns can be great times to start companies. It may be harder to get funding but it forces you to be creative and let's you appreciate the value of TIME in the equation of start-up life. You have to be leaner and provide unique products. Plus the give everything away free model is probably not going to work for long especially taking into mind what others have said regarding Google Adwords. I think advertisers are going to hire resources to find the right places to advertise instead of or in addition to things like Google Ads. I've already had people buy direct advertising on my blog posts at entrepreMusings.com and I don't show Google Ads on any of our sites. I experiment with placing ads myself but I'm not very good at it...throwing money away...feels a bit like gambling if you ask me. IMHO:

Web 1.0 = ASP (my first company fell in this category -- hardware and web software)
Web 2.0 = ASP + some fancy new technology with the term social network attached to it focused more on the general pop, blogging
Web 3.0 = ASP for businesses, end consumer, 3D internet, social networking, with a focus on internet based applications that take the next steps of moving from a PC/computer based app (Word, Excel, etc.) to the Internet.

Re: Tough Times Ahead For The Web?

TimWalker — Wed, 19 Sep 2007 09:12:31 -0000

Good, sensible stuff here, Fred. As I just wrote on my blog ...
http://www.hooversbiz.com/2...

...what you say about "dry powder" is universally applicable, whether we're talking about Warren Buffet (bargain-hunting galore at the moment) or a sensibly run household. The folks who get burned, during times like this and in the possible forthcoming slump, are those who don't tend to the basics of being sensible with cash and leverage while building sustainable operations.

The details of execution are sometimes rocket science, but the basic principles -- whether in Web x.0, mortgage financing, or whatever else -- usually aren't.

Re: Tough Times Ahead For The Web?

Ibod Catooga — Wed, 19 Sep 2007 08:25:42 -0000

Mainly, what I think about the web is that I like to poop on cats. And I like to Grey Poupon cats. And the thing about cats is that they scream in agony when on a ham sandwich made by C+C Music Factory. Because a music factory produces music that sounds like it was made in a factory. Collectivism never worked for anything but termites, but my boss is not a termite, so on with the Thermite.

Once in the world a chicken read a book by Dostoevsky. The chicken was not happy with the translation into Navajo (all chickens speak fluent Navajo so the farmers can't understand them plotting their Revolution Most Fowl) so the chicken translated it herself. It was a very fine translation except it did not compile on the Amiga so Steve Jobs had to h4x0r the codpiece so that buglers would give an elegy for Pol Pot.

Anacreon wrote monody. He liked a wicked party.

Do -- Do -- you flagellate like I do?

Re: Tough Times Ahead For The Web?

David B. — Wed, 19 Sep 2007 04:19:01 -0000

Quite the opposite, Joe. Everyone saw the Web 1.0, Real Estate and debt bubbles. It wasn't a secret. Coolidge didn't run in 1928 because he knew the economy would collapse and didn't want it on his record. These things are obvious to anyone brave enough to be honest with themselves and with the numbers.

To me, everything is either monstrously overvalued, such as Google, or a flat-out Ponzi scheme (Facebook, Twitter). People here are optimistic, and that's great, but it's also the demographic of early adopters. I think it's naive. In the end, it has to be about business; it has to be about value. And I see little true value around.

Re: Tough Times Ahead For The Web?

Don Jones — Wed, 19 Sep 2007 00:54:03 -0000

Just like there are established companies that do well (or better) during a recession, there are startups that offer better value for the same price (or free) than existing solutions - the old substitution concept.

My own company, VentureDeal, offers better information for the same money. I think it will do well if there is a recession.

Re: Tough Times Ahead For The Web?

Chris Marstall — Tue, 18 Sep 2007 23:16:23 -0000

Don't forget about Y2K ... that was a huge factor in how dramatic a collapse web 1.0 suffered. unbelievable sums were being spent on IT to fix a single bug, and the spigot was turned off all at once in the first quarter of 2000. Within a couple of months NASDAQ had collapsed and the "dot com" boom was over.

I don't think there's a comparable coeval phenomenon this time around, so I think the downturn won't be as pronounced (plus i think it could still be years off).

Also I agree with vruz - true entrepreneurs won't be phased by it, they will just keep on trucking. and the best will have cool jobs during the downturn :)

Re: Tough Times Ahead For The Web?

Aaron Mentele — Tue, 18 Sep 2007 21:40:09 -0000

Might be a stretch to assume that a soft time for Web 2.0 entrepreneurs would trigger a soft time for the web economy at large, or vice versa. There are a lot of online players that don't need funding (or adsense checks) to make things happen.

Re: Tough Times Ahead For The Web?

Jon Callaghan — Tue, 18 Sep 2007 20:01:30 -0000

Hi Fred,

Great post. I think you're spot on.
It is eerily similar to last bubble. wrt deals: lots of me-too companies, fuzzy value delivered to niche "tail" customers, feature building. . On the investor side, an all-too familiar urgency around most deals, fear of missing the next big deal, and a rush of capital to fund anything around certain markets.

Most disturbing to me is that which killed us last time: fragmentation. Fragmentation of talent across companies, fragmentation of capital across a marketplace, and fragmentation of ideas, time, and attention.

The challenge is that while the micro dynamics are disturbing, the markets around the web (video, commerce, media) are large, hyper-growth markets. Broad infrastructure changes, adoption and proliferation of web apps, the massive shift in media to the web, and a long overdue enterprise IT upgrade cycle create disruption and opportunity.

So we’re investing, (but carefully) and sticking closely to our strategy of early and very early with exceptional people.

Re: Tough Times Ahead For The Web?

Jim in Colorado — Tue, 18 Sep 2007 19:17:39 -0000

If the adwords prices drop affiliate marketers will step in and start to make money the cheaper traffic with direct response and lead gen ads. Might hurt google some but web marketers will fill the void, in my opinion.

Re: Tough Times Ahead For The Web?

Ted — Tue, 18 Sep 2007 19:13:14 -0000

Part of the problem is undoubtedly people who are in the game for short term profit and not for creating long term value. This has always been the way of things... Fred, are you part of the problem, or part of the solution? This is something we can all ask ourselves.

Re: Tough Times Ahead For The Web?

gedcarroll — Tue, 18 Sep 2007 16:01:50 -0000

I think that you are one the money, we are also due a cyclical downturn on online advertising rates based on those changes which is going to hit all those 'triple A' businesses (arrogance, AJAX, Adsense) partly driven by economic uncertainty and the fad-driven nature of marketing.

Re: Tough Times Ahead For The Web?

vruz — Tue, 18 Sep 2007 14:49:23 -0000

you can benefit from some winds helping you get there faster, but ultimately the ship has to be able to stay afloat and navigate alone.

the new crop of web 2.0 opportunists will come and go, just as the 1.0 ones did, no surprise there, the actual innovators will remain because they're in it for life.

the very moment you see them in fervent displays of X.0 exhuberance believing the laws of free market don't apply to them, you know they're oh so toast.

if you create actual value, it sooner or later shows, good business is always good business and that will never change.

Re: Tough Times Ahead For The Web?

MD — Tue, 18 Sep 2007 14:32:54 -0000

On the supply side, word is that percentage of graduating MBAs joining start-ups is back near record levels. Compound that with the 4-year roll off of Google employees (due to IPO stock grants vesting) and there's about to be way too many people working on the "next big thing"...if there isn't already.

Re: Tough Times Ahead For The Web?

Jeremy Epstein (jer979) — Tue, 18 Sep 2007 14:28:22 -0000

I'm not suggesting that you should be anything but your normal, candid, honest self, but the thought crossed my mind if, someone like you, with such reach in terms of numbers/audience (relatively speaking, I suppose) may now have the influence to create (in part) a self-fulfilling prophecy.

I read your blog b/c I have respect for your opinions about the Internet and VC world [we'll leave politics out of it! :-) ] and I just wonder if people may say, "hmmm, Fred thinks this way, so maybe he's right, which means I should cut back on spending," and then the cycle begins.

Maybe I am giving you too much credit (nah!), and definitely don't want you to be anything but authentic (another reason we read), but just a thought I had.

BTW, I am going to a DC event w/founder of Pandora.com tonight. should be cool.

Re: Tough Times Ahead For The Web?

Brett Williams — Tue, 18 Sep 2007 14:26:13 -0000

Let's subtract the ABCP (asset backed mortgage paper) crisis from the equation, what do you think then? I know it is somewhat of a moot point, because the fallout from the ABCP debacle will stretch into most if not all facets of the economy, but for a moment, let's pretend it wasn't there.

With that subtraction, what do you see? Do you still see the environment that lead to the the collapse of Web 1.0?

A month or two ago, this debate was raging through the bolgosphere, and I took the side of yes, there is going to be a hiccup, a big one. Then I had a moment or two where I wondered, maybe not (this is before ABCP came to total light). Now, all I'm reading about is software as a service, particularly office applications. Today, Yahoo shelled out $350 million to buy an application provider, which, after I look at it's product offering, I believe Yahoo really paid for a spreadsheet online authoring tool, to keep pace with Google.

Will any of these online office application tools ever take the place of something like MS Office? I don't believe they will, at least not in the current form of being hosted by a third party. With the current setup, this product offering is a counterintelligence nightmare. The reason why I offer this example is that this is a sign, to me, of over exuberance, the true sign of an upcoming bubble burst - I believe A. Greenspan recently said something similar in regards to exuberance.

Re: Tough Times Ahead For The Web?

WayneMulligan — Tue, 18 Sep 2007 14:09:06 -0000

For well capitalized investors/companies the coming "shake out" won't really impact their business dramatically. Reason being, the model under which many of these web companies are built - advertising - is at much more sustainable levels than it was "last time". We don't have CPM rates being arbitrarily inflated and not matching real customer acquisition costs.

Making an argument for an all out crash is like saying network television is going down the tubes because we're going into a recession. Just like network TV, the web as a media platform has become an integral part of every company's advertising strategy and budget. They can quantify benefits now.

Will we run into a recession? Like Fred said, I dunno. But I do know that the goal of every entrepreneur reading this should be to continue innovating and executing, and every VC should be looking to fund the best and brightest of this bunch. We're past the "proof of concept" stage in this medium - so for us, it's gotta be business as usual.

Re: Tough Times Ahead For The Web?

Zach Coelius — Tue, 18 Sep 2007 13:13:25 -0000

I agree, I responded on my blog here.

The key indicator I am watching are adwords prices. If they start to dip it will hurt everyone.