Rising Dead Pool Indicates Web 2.0 Bubble is Popping

The Web 2.0 "bubble" - where a thousand ventures can bloom and thrive - is starting to pop. In the last few weeks the number of startups to go belly up or teter on the brink has increased. TechCrunch is my yardstick for all things Web 2.0. Let's take a closer look at some hard data.

In all of Q4 2006 TechCrunch wrote about six companies/products entering what Michael Arrington calls the Dead Pool. These include Audioblogger (October 4), LiveLocker (October 16), Odeo (October 25), Shadows (November 22), Google Answers (November 29) and RawSugar (December 30).

Flash forward to 2007. In just January alone, already we have seven companies and products that have been sacked or are "in the grasp." These include FilmLoop (January 6), Browster (January 7), Insider Pages (January 7), Judy's Book (January 9), Findory (January 14), BitPool (January 19) and Performancing (January 22).

So, does this mean that Web 2.0 is dead? No, but what we have already is a clear winnowing thanks to supply and demand.

Startups are launching by the boatload and getting funded too. Every day I get emails about a dozen of them and I read about another two dozen more. These days it's cheap to start an online venture. Digg launched for $200.

However, with the IPO market closed, almost everyone has two end games - grow through advertising or get acquired by Google, Yahoo, etc. This is creating an environment where there's far more supply than demand. The number of startups launching way outweighs the number of acquisitions. Further, advertisers are timid when it comes to spending on unproven startups. They've been burned before during Web 1.0. So while money is shifting from TV, it's going to larger players.

Web 2.0 is definitely here to stay. The tools overall empower people to do what they have been for thousands of year and that's express themselves. Soon it will invade the enterprise too, as CNN noted earlier this week. However, already in 2007 the shakeout seems to be underway.