Are we heading for web bust 2.0?

A number of recent articles have suggested we may be heading for the second web crash.  Most of these theories are base don the inflated prices being paid for barely profitable companies because they fall under the category of “social media” or because they are the latest phenomenon on the web.  Others are quoting the fact that advertiser supply is outstripping demand and many websites are being left with unfulfilled inventory.

But does this signify the beginning of the end? I don’t think so.  I’m not saying change isn’t around the corner, but at the end of the day many companies are yet to fully embrace the potential of the Internet and so there is still growth on the horizon as far as I can see.  I agree with the comments about inflated prices, Google is unlikely to ever recoup the $1.65 Billion it paid for Youtube unless it can come up with a more innovative way of monetising its traffic.  Similarly, although it is a profitable network, Microsoft paid a massively inflated price of $240 million for a measly 1.6% share in Facebook which it will never see a return on (in my humble opinion).  But this does not necessarily mean that we are seeing a repeat of the dot com collapse.  For a start, Google and MSN can afford it, they have VERY large warchest built up from years of successful ventures.

More likely, for me, is that we will see a fall in the ad prices demanded as inventory grows and needs to be fulfilled.  This may mean the demise of some smaller players in the market but those with a strong legacy and a solid proposition will survive and continue to prosper.  In any industry you are at risk unless you have a solid offering and the Internet is no different, just because a few bedroom companies go out of business doesn’t make it the end of the Internet!

All of this can only be good for advertisers as the market levels out, and potentially dips a little, so will the prices.  Bring it on I say!