Could This Economic Downturn Be The Best Thing To Happen To Web 2.0?

Mark Evans put it more kindly than I would when he said in a post this morning that “Seesmic illustrates the ugly side of the Web 2.0 landscape”. Mark’s point being that there are a lot of Seesmic-like startups that are being financed by VC on nothing more than a wish and a prayer. In some ways this makes the current Web 2.0 no different than the first version that ended with the DotCom Crash. As with then everything is being built on empty shells held up by VC fortunes that are all hoping for that one Google-like payout.

Like Mark I don’t mean to pick on specific companies like Seesmic or Twitter but the fact is they are the poster children of this faux web business that keeps seeing larger and larger valuations. Valuations that are based on nothing more that highly questionable pageviews and possible membership counts that can supposedly be translated into eyeballs pointed towards ads. Sure there are profitable Web 2.0 companies but they are companies that came into this with their eyes wide open and a business plan in hand. These types of companies are also few and far between in a web landscape that is predominately free models supported by VC dollars.

The idea that companies like Seesmic, Twitter and countless number of Web 2.0 startups can even be considered as real viable businesses because their main source of income comes from VCs is ludicrous. The thing is even VCs expect to be paid back at some point and how can a company like Seesmic; who recently took another VC payday of $6million, expect to pay those investors back when they aren’t even concerned with having a true viable source of income. Even Facebook has said that they are not concerned about making money at this point and don’t expect to need a monetization plan for another three years. Then there is Twitter who just recently got handed $15million but still no business plan in sight.

How much more of a hot air bubble example do we need to have in order to understand Web 2.0 can’t be sustainable with this current model of VC supported free businesses. Again pointing back Mark’s post I agree when he said

Not to pull a Robert Scoble and suddenly go doom and gloom but maybe we got suckered again. All the lessons learned seven or eight years about crazy schemes, companies raising lots of capital without a plan on how sell stuff, and the hype/euphoria surrounding the Web’s Next, Great growth phase were mostly forgotten.

The interesting thing is that due to the ongoing economic problems VC are saying that things have to change if Web 2.0 business want to succeed. Even though they might be saying this there are still startups with no business plans getting funding right now so I guess we’ll see how much change actually takes place.

However one interesting I had as I thought this post through is that this currently economic instability and uncertainty could have been the saving grace of Web 2.0. With the way that Web 2.0 was going with this utter reliance of VC money and a total lack of real business plans that we were on the road to a repeat of the Web 1.0 crash and burn. This time around though it was a totally different segment of financial market that was the cause of the meltdown it could have very well been the bursting of the Web 2.0 bubble that once again sent us into a downward spiral.

Under the current sircumstances Web 2.0 has been given a chance to gently deflate and give us all a chance to re-evaluate and regroup. It has given us a chance to take a deep breath and get a grip on what basic business principals are and bring them back into the realm of Web 2.0 where they are in short supply.

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