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Summary:

[qi:021] Earlier this week, MeeVee, an online television guide, decided to acquire Top Ten Sources, a Boston-based social news and information site. Last night, Next New Networks bought BarelyPolitical.com, the production company responsible for Obama Girl, for an undisclosed amount of money. And there is news […]

[qi:021] Earlier this week, MeeVee, an online television guide, decided to acquire Top Ten Sources, a Boston-based social news and information site. Last night, Next New Networks bought BarelyPolitical.com, the production company responsible for Obama Girl, for an undisclosed amount of money. And there is news that Automattic has acquired Gravatar, a small project that gives WordPress users the ability to add avatars to their profiles.

In isolation, these three deals are so marginal and unimportant that you might gloss over them. When taken together, however, they point to a trend that is starting to gather momentum. I have been hearing from many small startups that are looking to either acquire or merge with others in order to bulk up and stay competitive in a very crowded market.

“Time to market,” a phrase typically found in the vernacular of large companies, is making its way down the food chain as well. Acquiring users and boosting page views is a challenge, especially with hundreds of startups vying for attention (and usage). The low barriers to entry for building and deploying consumer web products has resulted in an abundance of companies, many of marginal utility.

Many are mere features makers that need to find a safer cocoon or else face a bleak future. Sure there are some buyers, including Google (GOOG), Yahoo (YHOO, Microsoft (MSFT), eBay (EBAY) and newly proliferate media companies from the East Coast. But they can’t buy everything — and that is why startups should start developing strategies to what is essentially the web equivalent of “marrying up.”

But the clock is ticking. Eternal optimist Tim O’Reilly, in an interview with The New York Times, today expressed concerns about the me-too, copycat startups and the generous amount of dollars they are snagging from venture capital funders. He said that when the bubble inevitably pops, “there are going to be a lot of people out of work again.”

And our good friend Scott Rafer, who has been on both the winning and losing side of the equation, is worried that we haven’t learned from our mistakes.

“Every single one of these cycles lasted between eight and 11 years. The eight-year anniversary of the last collapse is in March 2008. Now, if someone wants to stand up and tell me why this cycle is somehow going to be a longer one — I’m all ears,” he says. If Rafer is right, then it is prudent for startups to start coming up with Plan B. And maybe Plan B should stand for “buying or merging.”

Disclosure: GigaOM and Automattic share a common investor, True Ventures. Matt Mullenweg, founder of the company, is one of my close friends.

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By Om Malik
  1. Teaming up is so critical these days – people fear it because they believe that a merger might be the end result but the truth is that both companies can walk away smarter than going it alone.

    This is one of the benefits of co-working.

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  2. Widget makers CAN make a lot of money – look at shareware. There is no willingness-to-pay for Web 2.0, that’s the problem. I have said enough already, the solution is obvious.

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  3. think how amazing what blogs can influence in this world scale business.

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  4. Om,
    I think you’ll start to see more teaming up as start-ups look for creative ways to operate more efficiently. I would argue that a more pragmatic approach to spending is the biggest difference between the last tech boom and the current one – something lost amid all the talk about a bust.

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  5. [...] So Matt Mullenweg has announced on his blog not too long ago that his company Automattic(The company that runs wordpress.com) has bought Gravatar. I think this is fairly big and if not big, important news and so does Om Malik. [...]

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  6. In a way, this entire bubble is a product of the acquisition spree of the companies like Yahoo, Google, Microsoft etc. Taking the case of Google, just because they want to be omnipresent in the internet world, and now in the mobile world, they keep on acquiring companies irrespective of their profitability. Their process allures all these start-ups for the dream of quick money. I guess, when the bubble breaks, these big companies also will get their share of regret.

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  7. You linked to Matt’s post on the Gravatar blog. That post seems to have vanished.

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  8. [...] October 18th, 2007 Matt Mullenweg posted yesterday on the Gravatar blog about the acquisition of Gravatar by Automattic. The post isn’t there now. It wasn’t just my imagination: Om Malik linked to the post. [...]

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  9. What if rich startup with funding is searching for real technological basis for its proposals? Looks like bubble 2.0 is coming…

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  10. [...] of the nonsense being written about the new “bubble”. And related discussions about the need for startups to “bulk up” (from Om Malik no less, a man full of good sense usually) and palpitations about being five months [...]

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