I ran across this video from Tim O’Reilly’s Twitter account on the Crisis on Wall St & Web 2.0 companies. While I hate media madness about the stock market and the economy, I liked the insight that these interviewees gave into their perspective. While many people are calling this a “Crisis on Wall St” I like to call it a “Crunch on Wall St.” Times are getting tough and its time for more sound investments. Those who have been investing cavalierly might get shot in the foot when all the hype surrounding several markets start to come crashing down.
Here are the major points I think stand out:
#1 – Recessions Weed Out the Good from the Bad
Several times the idea was said that this is a time where good companies with a good business model will survive and those without it won’t. I can see many weird, fluffy, odd web companies just dying out because their idea might be cool, but their business model doesn’t work. So many companies strive to get that investment money that they don’t know what they’ll do afterward with it. When money is tight, those companies that just don’t make sense will be left in the dust, and those companies with a sound business model will stand and benefit.
Lets look back at the “first” .com boom or “dot-com-bubble”. Hundreds, if not thousands of companies were created or joined in with Internet technologies. A hype was created around the “dot-com” companies and everyone was going to go big and get rich. Millions of dollars were invested and spent. The problem was all these companies were formed around an idea instead of a model. When things got tight, all the comanies who had nothing to show but the hype died off. The companies with a real business model like eBay, Amazon, etc. stuck around and are thriving today.
“Web 2.0″ is like dot-com-bubble 2.0. There is a lot of hype, a lot of investors, and ideas. Now things are tight and we’ll see which companies have a real model, and which can adapt, and which are fluff.
#2 – Lean Companies Will Do Well, Fat Companies Will Struggle
If a Web 2.0 company has grown it’s expenses along with it’s revenue, and are scaling appropriately, they are less likely to be affected, or at least not a severe. Companies with huge investors that have gotten “fat” with investor money could find themselves starving when those investors start to be more cautious. People are going to be more careful how they invest. It will be harder for a company that is shady to get money.
#3 – Survival of the those who Adapt
Some companies who are servicing large enterprises need to adapt to fit their needs. Web 2.0 technologies have the potential to be very affordable. Companies who adapt to their customers changing needs in this time of “crisis” or “crunch.” If a company isn’t able to adapt, they will likely face severe consequences.
#4 – Smart Companies will face Challenges, But Overcome
The overtone of each interviewed person was optimistic. They said there will be challenges, many and difficult. However, if a company is smart they will overcome these challenges. The real question is: is your company based on the bubble? Or is it a sound business model?
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