Recession and the End of ‘Web 2.0’

Given the recession, it’s probably reasonable for us to now start talking about the “end of Web 2.0.”

I’m not talking about the end of innovations (e.g., community) that have been lumped under that heading. Rather I’m talking about the closing of most of the companies that populate this site.

I previously argued that only a fraction of the businesses represented by the logos above would survive in a recession and the site would effectively become the “Web2.0 graveyard.” I’m not hoping for any startup’s failure; I just think the money is drying up and, as with the “dot-com crash” of 2001, we’re going to see lots of them.

Along those lines, Om Malik and Venture Beat report on the Sequoia Capital “RIP: Good Times” meeting for its portfolio CEOs. (The slides are on Venture Beat for those that want them.)

Scary stuff: the panicked selling on markets all over the world is turning fears of a global recession a self-fulfilling prophecy.

But what about Local? I have my own ideas about how the next 12 months may unfold (consolidation is one theme) but what do you folks think is going to happen to “the local ecosystem”?

Will we see:

  • The demise of all local startups without meaningful cash flow?
  • Acquisitions of many weakened smaller players by larger ones?
  • Consolidation or mergers among YP publishers out of necessity?
  • Newspapers: will many of them be going bankrupt?

6 Responses to “Recession and the End of ‘Web 2.0’”

  1. Andrew Shotland Says:

    On the start up side I think we are going to see a large failure rate over the next 6-12 months among those who haven’t proven their basic economic model. Those that have meaningful IP or traffic will be acquired for stock or low $. This will strengthen those start-ups that have a positive trajectory by reducing competition and increasing the availability of cheap, good talent.

    On the YP publisher side we are almost certainly going to see mergers, acquisitions and spin offs of assets that aren’t throwing off cash.

    On newspapers I think we’ll see more Tribune type deals but at fire sale prices.

    But hey it’s a beautiful fall day and the sun is still shining.

  2. Greg Sterling Says:

    Andrew:

    Notice on my MapQuest local post today the location is “Pleasanton” 🙂

  3. SoniaC Says:

    My vote is on a high number of failures punctuated with an acquisition frenzy by larger stabilized start-ups. On newspapers and yellow pages, we might see some network plays?

  4. Joel Toledano Says:

    I’d agree with Andrew on the likely high failure rate among startups. Very few in the local space have real, sustainable revenue models and the lesson from the Sequoia, Benchmark and other VC presos is – get to cash-flow positive ASAP. If you are looking for a business model, you might not have the runway to get there.

    The upshot for startups who do have such models is that the big players – YPs, search engines, etc. – are more interested in working out commercial deals now. A deal with money attached to it gets prioritized in the product pipeline pretty fast.

  5. Allan Says:

    Local businesses are probably the most distant from Wall Street. My intuition is that consumers still need to make transactions with their local businesses. Any online web service that can help local businesses weather the storm should be successful.

  6. palimadra Says:

    The reason for the failure of web 2.0 companies and startups is going to be the fact that they did not have a strong revenue model. Even websites like Twitter are going to face the heat and I hope that lessons are learnt and in future strong revenue models are basis of new services and startups

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