caito

Everybody is talking about Web 2.0 nowadays. Contrary to public belief, I think it’s a good idea to give a different child a different name, i.e. naming what is going on as “Web 2.0″ is a good thing in order to differentiate it from the first Bubble. But I might have preferred to call it “Bubble 2.0″…

No, I don’t think it’s bad what’s going on and I don’t think it’s wrong either. I actually even think it’s great. The web is finally growing up, it’s getting into it’s second generation and finally lots of people start understanding how to really use the web - as it was intended by Tim Berners Lee.

All the dynamic web sites, social networks, interlinking, and semanticizing of the web content is good. Dinosaurs, such as those website prohibiting deep-linking for example, will hopefully die out. It’s time for media companies to think Web 2.0ish - as I wrote in my other article Want to Keep Customers? Set them Free.

Now, what’s more important is to realize two things:

1. There will be only few players left from Web 2.0 when the dust settles
2. We need to get used to very short-lived, cyclical bubbles

Lets look at these hypothesis one by one.

1. There will be only few players left from Web 2.0 when the dust settles

Like in the good ol’ days of Web 1.0 (it’s really funny, it sounds like writing about something some 50 years ago or so), there will be a tremendous amount of entrepreneurs starting new ventures, with amazing ideas, some with dollar-signs in their eyes, some with an enthusiasm you’d think they are re-inventing religion, and they all will work like there is no tomorrow.

There will be some ten or twenty really good ideas and about ten or hundred times as much copy-cats. Venture capital will flow like the “Rivers of Babylon” and the fastest companies will survive - fastest with business idea and expansion strategies. Even though we should have learned it from Web 1.0, VCs will still inject huge amount of money into companies willing to sacrifice profitability for the sake of market share.

At the end, there will be only around 5-10 large companies left over (worldwide), which will buy out the smaller competitors.

What will be key to success? In my opinion, key to success will be (as usual) management skills but also patents, i.e. high-quality technology and business methods. Smaller companies, especially in Europe, should concentrate on generating high-value by patenting as many technological and business methods as possible to become an interesting acquisition target. I don’t really believe in the theory that small, European companies can compete on a world-wide scale with large American or Chinese companies.

Another suggestion for smaller European companies is to look not only to the US but also China, Korea, and Japan to be acquired, since these markets are generating huge companies with a big cash-pile. In order to become an acquisition target for Far-East companies, smaller European companies should already implement some ways of Asian business practices (no further details here).

So, when all the dust settles, there will be only some big companies left. I guess, some of the biggest left from Far East could be Daum Communications of Korea, Softbank (again on a buying spree), Sina/Sohu/Shanda from China.

What will happen to the Amazon, eBay, MSN, Google, Yahoo!? Call it heresy, but I think these companies are being threatened by the (what I call) Dinosaur-Syndrome: A very big body but a small brain (no, I don’t want to insult them). I know of few large companies who managed to turn-over. One of them was IBM. Remember IBM in the 90ies? Near-dead-dinosaur with a huge cash-pile but losing billions per year?

Google for one thing has just too much cash. Too much cash doesn’t help your business. They will go on for a shopping spree but you can’t really keep buying companies for a long time. Does anyone remember a company back during the Dot-com-bubble where the founders were proudly talking about buying 40 companies in one year?? You can’t remember them anymore? Well, of course, we can’t compare Google with that company but I am really afraid of two facts regarding Google: 1) Too much cash, and 2) Expanding into vastly non-core business and becoming a data-collecting-octopus. As you know, there are lots of issues with Google’s data collection and EFF is complaining heavily about Google’s policy of saving every activity of users and thus generating a perfect profile…

MSN is the old behemoth trying to follow-up with Google and the others. When I read something like eBay in talks to fend off Google threat (Reuters) where they write about eBay in talks with Yahoo! and MSN to fend off Google threat, I really think world is turning upside down. Anyone remember eBay and Yahoo! being really big competitors? Same for MSN? Well, since Microsoft is becoming slower and slower (Gee, do I dare to say “Windows Vista”?), I think one day they will be taken over by other, smaller and faster competitors - new competitors coming from … maybe old media (MySpace anyone?)

Well, same goes for Yahoo! and eBay. At least eBay is trying to get a handle on the future by buying Skype (business expansion into new markets - especially since I believe that VoIP is the future). What’s gonna happen to Yahoo!? I am eagerly awaiting some really neat, nice, great ideas from Yahoo! - waiting, waiting, waiting… Anyone remember the novel “Waiting for Godot”?

2. We need to get used to very short-lived, cyclical bubbles

Aaah, now we are getting to the more interesting part of the story. Did anyone really imagine the dawn of Web 2.0 back in, lets say, 2000? Well, of course, there were some people, like me playing around with the MSDN CD-ROMs and dynamic web and other issues, especially with respect to internetworked-websites and Wikis. There were a handful other people, too.

But what I mean is that the mass market didn’t really realize that there would be something like Web 2.0 in such a short time. Being a technician (ex software developer), I believe in the “Law of Series” when something is reproducible twice. Since it’s happening for the second time, it’s a series

That means that I really assume that we have to get used to cyclical, short-lived bubble-burst-phases in the future. The time period between bubble and burst will be around 10-15 years, so expect the next bubble-burst around 2010. Then, we’ll start another bubble to be burst around 2023 (a random number between 2020 and 2025) and so on.

Why I believe this? Because Internet has really managed to bring together vastly different minds on a world-wide scale never ever seen before. This allows for such an immense creativity we have never had in human history. Since most people around the world realized that Internet can create multi-millionairs or even multi-billionairs within five years, and since even governments realized the importance of the Internet for poverty-reduction, there will be ideas, business ideas, popping up all around the world.

Internet allows, for the first time in human history, to enable even the most remote person to come up with an idea and try to monetize it. And since hardware, software, bandwidth and storage prices have collapsed compared to the Web 1.0-time, the amount of creativity is the only limit for new businesses.

There are other factors, too. China became member of the WTO, which had and still has a tremendous effect on production and sourcing. Even a single person can now source in China - given he has some contact to there. And sourcing is not limited to production anymore - you can even source services in China, India, Vietnam, … I know a company in Germany sourcing in poor, small (i.e. a population of only 3 million) Armenia. And why not?

So, the bubble-burst-periods caused by the internet, globalization in general, and the widening of opportunities and markets will be ever shorter and we have to get used to it. And to be honest: I personally will love it…