Crash 2.0?

The LA Times covers (reg. req’d) “over investment” in me-too sites and online in general:

In the first three months of this year, venture investors funded 761 deals worth about $5.6 billion. That’s up 12% from the same period last year and the highest first quarter since 2002. One sector in particular is heating up fast: online media and entertainment.

Here’s my recent post on the same issue from a different angle, “Bubble 2.0 and Magical Thinking.”

Clearly there will be failures in the next year among startups. Yet consumers aren’t going to abandon the Internet — even if there is a second “crash.” That’s the central difference between then and now: consumer behavior.

Then, the consumers had yet to show up in big numbers, which is what sank many companies (beyond the loss of confidence). Now, the trends are very clear: consumers are online to stay. However, it remains a challenge to get their attention and to get enough of them to show up at your site to make any real money.

The stock market is largely driven by psychology (and irrational thinking in some cases) and the more the theory of the “coming crash” gains currency and momentum the more likely it will happen.

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Vaguely related: PredictWallStreet, a “wisdom of crowds” site.

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