Although I was invited to speak, I decided not to go to this week's Web 2.0 Expo. There wasn't enough value in my justifying a cross-country trip to California to attend or participate. Most of the vendors/speakers I can engage with online. In addition, there are other conferences I already have on my calendar, like Gnomedex, where I get to mingle with the digerati in the "meatspace."
Still, this morning when I woke up and began to slurp the buzz it occurred to me that I saw this movie before. Stories like this one about San Francisco 2.0 conjure memories of rooftop parties hosted by the Industry Standard. And Web 2.0 Expo feels eerily like Internet World circa 1999. We know how that movie ended, of course. I believe the same will happen to this conference within a year or two.
Now, Web 2.0 is different from the 1.0 era in many ways. This revolution is being driven bottom up by users as opposed to top-down from corporations. However, the exuberance is just about as strong today as it was in 1999. And too much hype is never a good thing. It makes big companies make big irrational investment decisions.
The economics are different today too. Dot-coms aren't exactly swooning on Nasdaq. Still, there is a venture bubble. Too many startups are getting gobs of funding (e.g. Podshow) and they won't be able to substantiate this real revenue quickly enough to appease the VCs.
The reason is simple supply and demand. While the cost of running an Internet company is a fraction of what it once was, there's a lot of competition for attention, ad dollars and enterprise revenue. The landscape is flatter. It's easier to, yes, have your lunch eaten.
Consider the enterprise space, for example. Lots of Web 2.0 startups are aiming their sails to these open waters. Some of them are run by very smart people. However, a recent study of CIOs by Forrester found that they only want to buy from big name vendors. Startups in this space should try to get a couple of customers and then sell out to the largest bidder.
Once the economy tightens - and it will, the Web 2.0 economy will cave and there will be a healthy shakeout. People will not get hurt like last time, but some will have to go back to regular jobs. I don't expect Michael Arrington to close TechCrunch and go back to being a lawyer. His costs are relatively low. But like everyone he will be forced to adapt.
So enjoy the exuberance. Bet on it, but carefully. I am just as enthusiastic as you are that we are living in a new age of communications. I bet my career on it. However, I always keep an eye on the big picture and remember the almighty business cycle. For example, Greenspan said today that global growth will help cushion the US Economy. What does that mean for your company? Think about that.
Much of the old will not be replaced by the new. For example, I don't subscribe to the fact that advertising or traditional PR/media relations is dying. It is changing, however, and Darwinism will force the marketing industry to adapt. There are lots of shades of grey.
So my advice is be prepared. Quickly adapt to technology-driven change, figure out how to capitalize on it and most importantly measure it, all while remaining a little bit paranoid. Do this and you will be fine. Just don't fall down into the irrational hole of 2.0 hype.
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