The Web 2.0 World is Skunk Drunk on Its Own Kool-Aid

This is a sad time for the web. It's as almost somber as the time just before the last bubble burst in 2000. I was working in PR with dot-com startups at the time and the way I feel now is how I did back then. I wish I didn't, but I do. Something needs to be said. Even if no one listens or cares what I think.

Now, it needs to be noted that I am as optimistic about technology's long-term impact on business, society and marketing perhaps as much as anyone you know. I bet my career on digital marketing. However, since I started this blog lots of people have rightfully made fun of how much I touted every little new site to come along. Their criticism is accurate.

However, over the last year my thinking has evolved dramatically. I have become less interested in every new shiny object and more engrossed in the social changes it, slowly, effects. This is in part a byproduct of the tech blogosphere getting drunk on its own Kool-Aid.

Many people I know, love and respect are heralding every new site as like it's Jes.usR.com. No one's casting a cynical eye anymore. No one's looking at valuations and reality - or at least very few people are.

The endless dot-com parties are back. So are the countless trade shows/conferences that regurgitate the same "new paradigms" the last 10 events did - with no end in sight. And yes, the ridiculous BS press releases are flying into my Gmail box. This is why I don't speak at or attend very many Web 2.0 conferences anymore. I don't have the heart for it. I would be stirring the big pot of Kool-Aid.

Let's face it, we're skunk drunk and it's because of money. It's almost like we all need to enter Betty Ford Clinic 2.0 together. This time, it's not stock market money but private equity, M&A, VCs and to some degree the reckless abandonment of logic by some advertisers who are perpetuating what is sure to end badly when the economy turns. Hubris is back my friends.

The bubble really began in earnest on October 9, 2006 when Google bought YouTube. That's when every person with an entrepreneurial itch woke up and smelled the hype and money. Prior to then, startups were more focused on the entrance, not the exit. But the Google YouTube deal and many others that followed (including big time investments) really opened up the floodgates to money and it changed the attitude of the web.

Meanwhile, the sleeping giant many of us mocked - the big media - got with the program. CNET's CEO talked about this today. The TechCrunches and Gizmodos of the world aren't a threat to his business. They're a boon because they send his sites traffic. Beth Comstock from NBC echoed a similar theme.

I am sorry to be a party pooper on conventional wisdom, really. But I miss the days of 2004 when the class that includes Flickr, del.icio.us and others started. They really were about changing the web, not making a quick buck (they did so only because they added value). There are companies still out there like them. Twitter is one I believe takes this approach. Automattic (the company behind Wordpress) appears to be another. Dave Winer also shares this spirt. He creates services like NYTimes River because it's fun and he thinks it will add value to our lives (and he is right).

However, most of the rest of today's net startups are only after the almighty dollar and while that's capitalism, it saddens me because it has done little but breed hubris.

Comments

[Richard Stacy]

Don't worry, it is nothing to be sad about. The game has simply moved on. It used to be about the latest new thing - now its about the bigger social picture. This is simply a reflection of the fact that social media is becoming established and maturing, it is not necessarily the sign of a bubble - money always flows chaotically into the space created by innovation. Stay ahead of the money and focus on the big thing. For me - the big thing is all about mediation - who or what is going to do it.

[Rob Safuto]

You're saying something that I've started to feel recently myself. The signal to noise ratio on the web has progressively worsened over the last year or so. At least this time the bubble is fueled by private equity so most average people can't get hurt when this whole things blows up.

[Steve Rhodes]

Hulu is a perfect example of a site with a lot of money behind it that doesn't understand the web.

They write "The team here is excited to gather real user feedback...We're committed to making the service great, which means that we'll be reading every piece of feedback ...will not stop in our pursuit to provide you more and more premium entertainment to enjoy on your terms. "

Take a look at the critical comments on the post many complaining Hulu doesn't offer anything close watching on their own terms. I read through 80 earlier - now it is up to over 170

http://blog.hulu.com/2007/10/28/beta-testing-begins-for-hulu

If they really understood, they would have had a post up by now responding to the criticism. Instead there are a lot of angry people saying they will continue to pirate shows, one of the things Hulu was supposed to provide a real alternative to.

There are still new, interesting sites, but any new site should study the history of the web and the best current sites before launching a beta which could be deeply flawed.

[Peter Cranstone]

Excellent post and right on point. I was there with my partner in 2000 and almost got drowned in the noise. It's the same now. 99% of the stuff coming out doesn't solve a customer problem and is no where close to being sustainable. It's all just an iteration. However don't despair there are still some special people out there that are working on things that will shine through the current noise. The key to all of this is persistence in the face of adversity and a willingness to learn and adapt.

[Dan Schawbel]

I don't think anyone can deny this post. Think about it, as you read an article saying that Youtube was purchased by google for a few billion, wouldn't you want to enter the market? The thing to note is that many of these web 2.0 startups never make it anyways.

[John Whiteside]

What took you so long? Seriously, if your thinking has changed over the last year, it hasn't shown in what you've been writing. But I think you are right.

[David Cruickshank]

I can't say that London feels the same way. Perhaps Silicon Valley is losing its appeal? Here are my thoughts on this, for what they're worth...

http://internet-biz.blogspot.com/2007/10/is-silicon-losing-its-shine.html

[Terry Heaton]

Congratulations, Steve, on an excellent post. And thank you.

[David Badash]

My two cents, as trite as they may be:

"man's ego is the fountainhead of human progress"http://en.wikipedia.org/wiki/The_Fountainhead

[Seni Thomas]

Where to begin. To start I agree 100%. Engineers build for engineers, and bloggers write for bloggers. We are consumed by our worlds and don't step out often enough. The first sign is the rush of nonsensical, ridiculous, impossible to spell company names that build an immediate barrier between you and the "real" world.

Second, bubbles occur when there is a gap between the emerging business models and the prediction models based on outdated monetization systems. The 2.0 bubble is propped up by the notion of laser targeting. Targeting is worthless without intent, which is non existent in the social computing realm. If I'm on Cnet send me a computer ad since I'm seeking information. Advertise to me on Facebook and I could care less, it doesn't matter if I happen to list skiing as an interest. I am there to connect with friends, invade my personal space and I will despise you. That said I do see potential in widgets riding the Branded Utility trend, and mobile executions by SNS will be interesting to watch.

Here's a post on the 2.0 farce:http://senithomas.wordpress.com/2007/10/25/facebooks-over-valuation-the-20-farce/

Here's one on intent based advertising:http://senithomas.wordpress.com/2007/10/24/the-power-of-google-over-facebook-advertising-at-the-point-of-intent/

[Allen Fuller]

To me, this post is excellent, and the comments insightful. I cannot agree more with the posts raising attention to questions of revenue stream and value proposition.

This is one of the exciting things about capitalism. When someone has a good idea, they can build on it. Then others with good ideas can build theirs as well. Sure, a bandwagon mentality can bloat the market, but the real top performers will rise to the top.

Per your observation, Steve, it does feel like the market is bloated. The creative people have done their great work, now the imitations are flowing like champagne in the Red Sox's locker room. Will the failure of so many bad ideas result in a bubble burst, or will it take another form?

Steve, you raise great questions here and hopefully raise some awareness that a good business plan doesn't always make for a good idea. But great innovation is worth fighting for.

[Alan Levy]

[Matt Carolan]

In order to fix a problem, you first have to admit you have a problem. People are now starting to admit the problem. Hopefully it is not too late. Good thoughts, Steve.

[Paul Walker]

You say "This time, it's not stock market money but private equity, M&A, VCs..." That's a HUGE difference between now and the last bubble, Steve, because a lot of individual shareholders are not losing their shirts this time around. The market will correct itself, if necessary, but there should be less volatility in the equity markets. Also don't kid yourself -- Twitter, Automatic, etc., are all interested in the money at some point.

[Jeremy Pepper]

Wow - ain't this a pot / kettle thing. I think I'll put this up there with your PC Magazine Twitter, but this time it sounds like you are unhappy with your job.

You have been a cheerleader since you've started this blog, and while most others have approached everything with caution, you talk about every new shiny toy as the next coming of Jesus. So, all that I read here is a link-baiting post, trying to get some juice.

I can give you one thing - at least you wrote with semi-passion, for once.

[csalomonlee]

Steve, the other side affect of what I like to call "Web 2.0 Exuberance" is the excesses of the past are coming back in this next round. Heck VentureBeat wrote about Facebook's party after their funding from Microsoft - again reminiscent of start-ups spending tens of thousands on parties to "celebrate" funding.

Here's my post about the "Web 2.0 Exuberance":http://prmeetsmarketing.wordpress.com/2007/10/15/party-like-its-1999-web-20-exuberance/

[Justin]

While the core may seem a bit frothy, there are new spaces around it composed of companies that are just as much built on the web, but focused on building outward from there rather than inward.

The new area of manufacturing as a service is starting to gain traction. The integration of networked processing, personalization, and physical production opens up entirely new possibilities in physical goods.

Integration with physical location is another area seeing explosive potential as technology catches up with the vision.

While the core is going through a (necessary) consolidation phase, there are dynamic moves to integrate the 99% of the world that isn't contained within a browser window to the digital infrastructure.

[David Martin]

Bravo, Steve! Well said.

[ProfessorDino]

Thank you, Steve. Glad to see you back in the real game. I'll start reading your blog again :)

[Anthony Kuhn]

Steve:

Ah, the frothiness of 'irrational exuberance' and the shortly-to-arrive-on-the-scene Tech 2.0 sub-prime meltdown. I can predict many burned fingers before the hot potato cools off and rationality returns to rule the day. I cross-posted on your piece to http://blog.innovators-network.org The Innovators Network is a non-profit dedicated to bringing technology to startups, small businesses, non-profits, venture capitalists and intellectual property experts. Please visit us and help grow our community!

Best wishes for continued success,

Anthony KuhnInnovators Network

[Adam Isserlis]

I must agree with what some of the posters above have said Steve - it's sort of hard to have it both ways. You can't just come in one day and change your mind about where this is all going. Things move in cycles - there will inherently be a consolidation, but in the end, the collective "we" will ultimately be better for it.

Your sentiments remind of Aha! moment Andrew Keen mentions at the beginning of The Cult of the Amateur: http://www.amazon.com/Cult-Amateur-Internet-Killing-Culture/dp/0385520808

[Mike]

Definitely a Silicon Valley thing... most of us from afar knew this "Web Too Ohhh" stuff was hype from the beginning.

[Angela]

I see how it breaks your heart the way things are going. It's that they do what they do for quick money, but the hype usually dies. Those who build on good foundation will last.

[aliotsy]

Charlie O’Donnell had a great post about this about six months ago. The most memorable quote:

We could do great things if we weren't so segregated into a small group of people punch drunk on Kool Aid and a great deal of people who've never even heard of Kool Aid.

In spite of the current state, I'm still fairly optimistic about the web. I figure that, just like the last bubble, investors will snap out of their reverie, the hysteria will die out, and truly useful, viable services will stick around or (after the bloodbath) start up.

I won't miss the companies that think dropping the "e" was the secret to Flickr's success.

[Tec]

I think you've hit the nail on the head.