Blog Post

Babble not Bubble 2.0*

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

John Battelle in an op-ed for The New York Times argues that we are not in a bubble, but instead we are building a better boom. Looking back over past few years, John argues that things have changed for the better. Open source software, commodity hardware and the ever falling prices of hardware have been game changers.

These emerging trends, were chronicled by me in pages of Business 2.0, first in The Rise of The Insta-Company, and then, The New Road To Riches and Escape from Silicon Valley. My colleague Michael Copeland and I had written two stories – The Fifth Wave and The Tech’s Big Comeback in recent months. What we point out that what were emerging trends are now a given.

John today, and Michael Parekh yesterday argue that the Web 2.0 is not in a bubble. I agree – so far it is not a bubble. But it can very quickly become one. Less than $200 million invested and some $100 million worth of exits. Not a bubble. Of course, those who have had successful – Flickr, OddPost and Weblogs Inc – most were built in the throes of what I call Internet depression. And raised minimal outside investments and bootstrapped. (Less is More!)

Looking forward, there are some signs that make you go… oh! oh!

The recent frenzy to fund say five to-do-lists, or five video hosting sites or whatever. What we have is “Babble 2.0.” We are talking about these new tiny-tots in breathless tones ( I am guilty as charged!) and talking a lot… all the time. We are not asking the “show me the money questions.” That is giving VC community some kind of a nervous tic, and an itch to invest …. as much as they can… now. I think the babble is leading to over investments, and hence the general sense of a bubble.

There is a chance of things getting out of control. Here is a scary statistic sent to me by the law firm of Foley & Lardner LLP. They surveyed top executives, advisors, outside consultants and investors in the emerging technology industry, and were told by 75% of the respondents that in these days of stagnant, post-bubble IPO M&A is the only exit. Wow… can there be so many M&A deals?

I think being nervous and cautious is a good thing. I love innovation, I love new ideas, and I love a happy, growing Silicon Valley. What I don’t like is what happened in 2000. No I don’t like entrepreneurs getting hurt, getting dispirited. Just because someone had to put too much money to work!

[ * ] Babble 2.0, first used by none other than Jason Fried. Copy right… Mr. Fried.

21 Responses to “Babble not Bubble 2.0*”

  1. @Zach Coelius. i totally disagree with you. the web 2.0 is not just a hype made by a bunch of people.. we already know what internet is about and what it is capable of doing in the future. back then it was a new thing that made it a technology driven boom.. with web 2.0 there is nothing revolutionary.. just some fancy buttons and more usability, thats all! oh, and dont forget that the growing number of users is a fact measured with much more accurate tools today.

    @Om Malik: a great read! someone posted this on my related blog entry,

  2. I think John is right and wrong. This is not a “bubbleâ€? like it was last time. No doubt. But “bubblesâ€?-that is self-reinforcing excitement among a group of people that cause them to do things they would not normally- are a naturally occurring phenomenon whenever there are lots of people doing the same thing. It is the nature of the beast. And whether John wants to admit it or not, there is certainly a self-reinforcing excitement out here. That excitement is causing lots of people to try and start companies who would not normally take the risk. And as a result of the new eco-system that John and you have pointed out, there are going to be some amazing successes. And as soon as the investors start noticing all the good stuff we are doing they will get excited as well. That is going to result in a “bubbleâ€?. Or what it really ought to be called is the normal cyclical nature of business. We are on the way up again. So John’s right about the particulars and wrong about what it all means.