That is not to say my grandfather was not a great investor because he was. He studied the market religiously and did very well. Nonetheless, he was a Warren Buffett type investor not often prone to take chances on products he didn’t understand; however, the buzz that was the dot com boom had even gotten to my grandfather. This was a sign of bad things to come.
However , the internet is buzzing again and it’s even got a catchy new name, “Web 2.0.” Web 2.0 is used to describe everything from new products and techniques on the web to the companies and people who use those products and techniques. It is a vague enough term for the cover of a magazine but still specific enough to charge people money for a conference.
So, quickly let’s go over what’s good and different about this new dot com boom, how you can make money this time around, and why some bad habits will never die.
Turning a profit was not very important during the first dot com boom and, in turn, not many companies did.
This time around making money is more important and more companies are.
Here are three, but certainly not the only three, reasons why people are now making money.
1. Online advertising has crossed the chasm. Companies are seeing the improved ROI from online advertising and are willing to spend larger portion the marketing budget on such advertising. This means that websites that did a good job getting visitors but did a bad job of making money can now do both.
Other advertising services that help include:
2. People are willing to pay for online products and services. iTunes can charge $0.99 for each song and $1.99 for a TV show and people are lining up to pay. Eight years ago, people were still apprehensive about payment security as well as finding it hard to get past the mindset that everything on the internet is supposed to be free.
3. Improvements in internet-based collaborative technologies make it much easier and less expensive to work with skilled people from across the globe. Wikis and Writely help with collaborative writing and communication, Basecamp project management, and Skype can be used for free audio/video conferencing. These and other tools allow entrepreneurs to coordinate teams of people from disparate locations on a shoestring.
There is another side effect to people making real money this time around; people with real talent are getting paid to innovate. People that cut their teeth in the last dot com boom (or weren’t even around then) have moved the web medium forward at light speed. People have been unlocking their inner Ben Franklins – becoming effective, multi-talented businessmen who rely on their own skills and dynamism over huge budgets and massive investment. Individuals and small groups of talented people can create, maintain, and profit from web projects without the need for venture capital or a highly publicized IPO.
With new tools like AJAX, Ruby on Rails, Flash, CSS, and semantic XHTML, websites and applications have gotten quicker, more reliable, more platform independent, and generally easier for the average web user. And, people with the knowledge to use these tools are reaping the rewards.
It is exciting to see and talk to people daily, who have real talent and good business ideas willing put their own time and money into a project and watch it succeed. In many ways, the Web 2.0 boom is a reward for those that took the craft of web development and online business seriously. These are the people that are not just in the web business for a quick and dirty profit.
I'm not here to paint a purely rosy picture of the Web 2.0 boom though. Large amounts of money in a given sector can often blind reasoned eyes. Because big companies have started paying big bucks again for websites and applications, people are jumping at the chance to create something that can be sold to Yahoo in under 6 months. The people who are looking to build quick and sell even quicker are falling into the same trap as the previous boom. It’s frightening to hear people talk about number of registered users or page views instead of monthly profits or multiple revenue streams.
A while ago Caterina of Flickr.com– one of the darlings of the Web 2.0 boom — wrote a blog post saying it was a bad time to start a company. Some praised her and others (including myself) jeered her. Where Caterina and I agree though is, it is a bad time to start a business with the sole purpose of being sold in six months. However, because of the innovations and growth in the internet market of the last 5 years, it is a great time to start a legitimate online business with a legitimate business model.
I plan to see a lot more success stories coming from this new internet boom. There are too many extremely talented people doing innovative things to have a bust like we did last time. I also plan on seeing several major, Pets.com-sized busts. We just need to remind ourselves it is not 1999 again and don’t jump ship too early. Many people involved this time around have learned from the mistakes of the past and are refusing to repeat those mistakes.
*I never owned AOL stock, I was just making a point.
This post is recylced from our guest blogging over on the Swamp Fox (hence the uncharacteristic length)