Saturday, October 01, 2005

Party like its 1999: Bubble 2.0

The phrase "Bubble 2.0" is taking off at an incredible pace in the blogosphere. Accotding to a Google Search there are already over 70,000 references to the exact phrase "Bubble 2.0." Here is a typical one from Fred Wilson at Flat Iron Investments in New York City. Fred writes in part:
You went to a great party, had too good of a time, woke up with a terrible hangover, and promised yourself you wouldn't do that again.

Then the people who threw the party invite you to the next one.

What do you do? Go, of course.
I was at a dinner on Thursday night where the subject came up, and the number one question was, is it 1997? 98? or 99? In other words, how long will this bubble cycle go? With the recent IPO of WebMD (up 26% on their opening day) and others, I'd say 1998. The conditions are similar -- significant macroeconomic issues clouded the horizon (Russian currency collapse, the collapse of long term capital management, the asian economic crises...) and yet, in late 1998 with the IPO of an incredible bubble market was launched.

I think we are more likely in early 1998 -- broadbased market speculation in Internet issues is still a little ways off. Also this cycle will be different in a number of ways -- with a number of solid existing large Internet companies, more startups will be acquired rather than go public. Secondly, again because of those existing companies, there are comparables out there that will help value the market. On the other hand, the Internet has grown enormously in the past 7 years -- significantly more people are online, they are using the Internet for more things and for more time, their connections are faster...

I think the key trend to watch is the way in which Internet companies begin to invade rich media (radio, TV, film) industries. If the last decade was largely about how the Internet transformed the print industry, the next decade will be about rich digital content and transforming those industries. I suppose I should include voice and the telecommunications industry in that as well.

It should prove to be an exciting time once again

No comments: