Is Web 2.0 A Bubble?

Is Web 2.0 A Bubble?

Many seem to think web 2.0 is an overhyped bubble. But history has proven that wherever the audiences go, so goes the money.

Is Web 2.0 A Bubble?

In my opinion, the sale of MySpace to News Corp for $580 million in Mar 2006 kicked off the current round of web 2.0 expectations. The following sale of YouTube to Google for $1.6 billion only ratcheted up those expectations. There is no doubt that there is a lot of hype floating around the web 2.0 crowd these days, but it differs from the bubble years of 1999-2000 in several key ways:

  • Profitable companies are emerging. Unlike in 1999, many companies have proven that they can make a lot of money on the Web. Back at the end of the last century, this was not taken as a given. Although sites had tremendous traffic there was just the promise of future profit. Today, companies like Google, Yahoo, Ebay, and even Amazon make hundreds of millions, it not billions of dollars in the online space.
  • Advertising is coming online. Once again this was not a given in 1999. Many of the traditional companies were skeptical of online advertising and senior marketers were unsure or uncomfortable discussing web metrics. Most were not ready to take a risk on this untested medium. This attitude has changed significantly. Web advertising is growing rapidly, and companies both big and small are dedicating a bigger and bigger share of their budget to online. Online advertising will surpass or already has surpassed print, outdoor, and radio. As audio and video technology continues to develop, this migration will only continue. All of this money flowing into online provides the fuel for these web 2.0 companies.
  • Consumers are spending more time than ever online. More than 70% of the consumers in the US are online and they are spending more and more time accessing and interacting with the Web. Book buying, television watching, and other past-times are stagnant or in decline as people turn to online activities, news, and information to take up their time.

It's true that many web 2.0 companies are not profitable. But as most of the 1.0 companies have shown, if you can get a big audience, profitability does follow. And web 2.0 companies are grabbing large audiences. MySpace is one of the top three most trafficked sites and YouTube gets 60,000,000 visitors per day (according to StatBrain). It is not difficult to imagine the poster-children of web 2.0 - Digg, Facebook, MySpace, YouTube becoming hugely profitable when they decide to concentrate on monetizing their audiences. Advertisers will pay to get in front of such large audiences.

It is also not difficult to see how thousands of niche sites can and will be supported by the advertising dollars that will flow into the online space over the next 10 years.

Is there a lot of hype over web 2.0? Yes. Will every new web 2.0 company survive? No. But many of the companies will succeed, help millions of consumers, and become profitable, successful companies.

Sol Nasisi
Sol Nasisi: Sol Nasisi is the co-founder and a past president of BestCashCow, an online resource for comprehensive bank rate information. In this capacity, he closely followed rate trends for all savings-related and loan products and the impact of rate fluctuations on the economy. He specifically focused on how rates impact consumers' ability to borrow and save. He also has authored a wee

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Comments

  • Anonymous

    June 22, 2007

    YouTube and some of the video sharing services may be overrated and seem a little bit like Broadcast.com plus 7 years. In my opinion, however, most Web 2.0 companies help to realize the true potential of the internet - enabling people to share information. Therefore, by and large, Web 2.0 has much less of a bubble quality that some of the earlier things that we have seen on the internet.

  • Anonymous

    June 22, 2007

    Very interesting article. I'd concur with the above comment. There is a compelling proposition to allowing the exchange of ideas and observations that will even outlast the proposition of online malls and garage sales (Amazon and EBay).

  • Anonymous

    June 23, 2007

    You are correct. Dynamic, user generated content is the future of the internet and advertisers will be willing to pay for it.

  • Anonymous

    June 29, 2007

    It's not a bubble but it will become increasingly harder for companies to break through. The falling cost of technology has caused a proliferation in online sites. Only a few will make it. It's the movie-start syndome brought to the web.

  • Anonymous

    July 12, 2007

    Not a bubble just a lot of hype. None of these companies has, as of yet delivered any profit. Not even YouTube which gets like a zillion people a day on it.

    That Arrington guy highlights companies that are mostly junk. I wouldn't spend two minutes using most of them. I'm surprised I actually spend any time on this site.

  • Richard Segal

    January 31, 2010

    Facebook and Twitter seem to be the winners and they are both giant brain wastes.

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