It seems that not a day goes by these days without someone screaming bubble bubble bubble. Many of the internet “old timers” (anyone in a management position last time around) got burned in the first bubble and now everything they see is a sign of a bubble and impending destruction. I don’t agree, companies that are getting huge valuations today have huge amounts of traffic and actual revenue and relatively low operating costs compared to 8 years ago.
Remember only 2 years ago, every expert was pointing out that Myspaces acquisition for $580 million was the peak of web 2.0, Same with Youtube and now Facebook? Yet no one mentions that myspace will pull in over $700 million this year.
1. Yes there are a lot of stupid ideas being funded these days, but 10 Stupid ideas require the same amount of funding as 1 Stupid idea did in the last bubble. Spending a few hundred thousand to test out 10 different business ideas and seeing which one works is just the cost of doing business. As long as 1 win out of 10 pays for the 10 losses there is nothing wrong with the model.
2. The only companies that are getting funded are those that are seeing traction and already have some sort of revenues. There is no getting 10 million these days for a stupid idea you came up with last night.
3. 10 years ago Knowledge was hoarded. Googles/Goto business model was nothing revolutionary. Amazon actually invented affiliate marketing and there were a LOT of people making insane amounts of money off it, same with SEO and SEM. Creating a adwords like system was a no brainer for people involved in the affiliate marketing world. The problem was the vast majority of people running internet companies had no clue about the internet. I remember working at a internet company at the time and they hired a bar tender to become a project manager! In todays world senior management is much more aware of affiliate marketing, SEO, SEM and other ways of generating money.
4. Vaporware isn’t IPO’ing, there is no exiting when all you have is a stupid idea and no revenues.
5. Ad rates are still rock bottom, revenues generated today are done between 5 cents a CPM for social networks up to $5.00 CPM for niche sites like autoblog. No ones business is based on making $30 CPM’s
6. The ability to start a company is now a commodity. You don’t see “experts” yelling that adsense is a bubble even though hundreds of thousands of people now making a living from it. You don’t see experts saying Ebay is a bubble even though hundreds of thousands of people make a living from it. Why do people have a hard time accepting that anyone and their dog can now start a company online AND make money ? The cost of starting a website is heading to 0, sure there are a lot of startups today but give it 4 or 5 years and there will be 4 or 5 times as many then as there are today.
The best is yet to come, as Advertising rates will increase and I think Microsoft will become a leader in the space as they are innovating and Brian McAndrews who leads the Advertiser and Publisher Solutions seems to know what he is talking about. I am pretty confident we will see remnant advertising rates double in the next 2 years.