The New Web 2.0 Boom

Posted on March 8, 2006

Wired has an article about a new technology or Internet boom. It says this boom is different from the dot-com crash boom because it is not a bubble and the "underlying economics are so much healthier." Some of today's companies may make it because they are not relying on as much start-up cash and many uses of the Internet have become common practices.

Today, broadband is mainstream, online shopping is commonplace, everyone has a wireless device or two, and Apple's latest music player was - for the fifth season in a row - the must-have holiday gift. The Internet and digital media are clearly not fads. Over the past decade, we've started to live a life only imagined in mid-'90s business plans. As a result, some silly bubble-era ideas are starting to actually make sense - perhaps a lot of sense.

Free phone calls over the Internet? That's Skype, which eBay just bought for nearly $4 billion. Online virtual communities? Now a global phenomenon in the form of massively multiplayer online games. Free music sites? MySpace, which rivals Google in traffic. (The boom's ultimate echo: The owner of just paid $1 million for, in hopes of starting what amounts to a new Just so long as it doesn't ship 50-pound bags of chow.)

The second reason that this boom is so different from the last is that the sunk costs of the dotcom era make the economics of entrepreneurship more favorable. In the bad old days, companies bankrupted themselves building out their fiber-optic networks. Bad for investors, good for everyone else: We're now enjoying supercheap bandwidth. So, too, for storage, screens, and a host of other technologies that are benefiting from profligate '90s-era investment and research.

Meanwhile, open source software has come of age, and computer hardware will soon cost less than the electricity it takes to run it. The result: industrial-strength servers that are cheaper than desktop PCs (sorry, Sun). Or, if you prefer, you can buy hardware and software even more cheaply as a hosted service (there's that inexpensive bandwidth again).

At the same time there are many companies that won't make it. For example, how many bookmark sharing services can really survive? Some Web 2.0 companies will survive while others were not. But unlike the dot-com crash most of the non-survivors will not waste millions and millions of cash.

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