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Is the Dot-Com Sky Really Falling?

October 17, 2007 BY Mark Evans

Sky Falling
What are the telltale signs that the current dot-com boom (Boom 2.0?) is about to burst?

Is the the lofty prices being paid by Yahoo, Google and Microsoft for start-ups with little revenue? Is it bloggers such as Henry Blodget and Fred Wilson talking about being concerned about the health of the online economy? Or is it respected newspapers such as the New York Times and Wall Street Journal writing Chicken-Little-the-Sky-is-Falling stories?

While it’s difficult to tell whether the boom is poised to go bust any time soon, it is interesting to see the NYT publish a story today featuring the words “madness” and “irrational exuberance” a week after the WSJ had a story looking at “today’s silliness”.

It may be that the NYT and WSJ are doing two things: they both have concerns about what’s going on; and/or they don’t want to be caught with their pants down if the boom suddenly ends. Having been a high-tech reporter during the last dot-com boom, you have to remember the media got caught up in the dot-com boom as much as anyone. The media landscape was chock-a-block with bubbly, positive stories about the Web and the scores of entrepreneurs hitting the jackpot.

It was a love-in but when the boom suddenly ended, the media was surprised as anyone. For all its objectivity, there hadn’t been a lot of media/reporter who had jumped off the bandwagon. Why? The boom was fun to cover. As a reporter, you got to write lots of stories, went to some really great parties, were given plenty of schwag, and met interesting people armed with lots of VC or IPO money.

It may be that the media learned its lesson and embraced the old adage: “Fool me once, shame on you. Fool me twice, shame on me.” Maybe this time around, there’s some more pragmatism when it comes to the boom and the possibility of a bust. It could simply be that some media have decided it’s better to have warned people about what could happen rather than be surprised again and look foolish.

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  • Steve

    I think you’ll find the correct adage is: “Fool me once… shame on… shame on you. Fool me – you can’t get fooled again”
    ;)

  • http://www.webomatica.com/wordpress/ Webomatica

    I would also add the laxity of the mainstream media when covering both the housing bubble and the leadup to the Iraq War. Then, add on the fact that aspects of Web 2.0 is directly competing with traditional media – newspapers specifically – and those are additional reasons for the wariness you astutely observe…

  • http://www.livedigitally.com Jeremy Toeman

    Good post Mark. I think we have an interesting mix out here. There are companies (Facebook) who are getting massive valuations on questionable metrics. There are startups getting funded whose entire businesses are features on top of other NON-established platforms (like Twitter). It’s a little crazy.

    That all said, I seriously doubt we will have a massive bust like the dot-com bubble caused. I think we will see some shorter waves/cycles of inflation/deflation – more like a balloon than a bubble. While there seems like there’s a lot of mania (and there is), there’s a huge difference in the amount of funding and spending going on.

    While companies are still chasing the wrong metrics in my opinion (e.g. traffic instead of profitability), they are much more sober about their spending and are less focused on ridiculous goals like say, headcount.

    The only part that really gets my goat is the quantity of 20-somethings who are running around the Valley either starting or working for these companies. Look around at people who were “Web producers” or “business development associates” back during the dot-com era, you’ll see they aren’t exactly on some wonderful career track. Seeing a lot of the same now, people who are “kinda” working hard, but not learning any really useful, attributable skills that will apply to future businesses.

    end of rant.

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  • http://www.tiltul.com/ TilTul01

    It is all about creating “M&A hype to stimulate a chain reaction”.
    VCs, Companies and financial institutes makes money when transactions occur – no one really care if there is a real value and long term business behind it.
    A real innovative product and business take time to mature and to establish its customer base.
    Thus, it is natural that few large deals will stimulate inflation for Internet “Social something…” companies and will deplete investments from other valuable products and business.
    http://www.tiltul.com/

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