Did I just hear a pop? (or a mini pop?)

The image Is it a bubble or not discussions have been going on for two years now. There is no question we are experiencing some bubble-like activity these days, so the only questions is will we see bubble-bursting like activity?

I believe it’s going to be a bloody 4th quarter for Web 2.0 companies. Why?

  1. The stock market correction is going to have an impact on advertising, and web 2.0 companies are 99% driven by advertising.
  2. Google and Apple are going to have a hard time keeping up their spectacular performance, and those stocks seem to be driven by the optimism those companies product inspire. You can’t hit a home run ever time you’re up to bat (although it does seem that way sometimes), so I’m thinking these two start shaking folks are going to get scared. More from HB on this (which I read AFTER my post!).
  3. Technorati *laid-off* eight people today. I have not seen a LAYOFF situation since 2002 I think. This is significant because Technorati didn’t say restructuring. They said we don’t need these positions and we can’t afford them. Dave says in his post, in fact, that they are scaling the business in line with their revenue. Why would you scale a growing business to revenue!?!? Why not keep scaling it up!??! Oh, right… the market is changing… which leads me to my next point:
  4. There are a bunch of Web 2.0 companies on the road raising second rounds and I gotta thing that there is not enough VC interest in funding them all. We’ve started a lot of experiments over the past two years, and any time you get loose like this and try a lot of stuff a lot of stuff fails. Again, Henry Blodget commented on this and i just read it AFTER writing my post…. I guess we have the same scars.

Will we see thousands of layoffs? Nope. But we will see a lot of folks tighten their belts and move from dream and build mode to control costs and make a profit mode. That’s not a bad thing, but it will certainly change the climate.

That being said, what do I know… I’ve lived through three cycle sessions so far: down to up (95 to 2001), up to down 2001 to 2003, and down to up (2003 to 2007). Frankly, I’ve got a huge scar across my belly from that last “up to down” cycle so I’m conservative. I keep thinking… “i’ve seen this before and I’m going to be ready this time!” Perhaps that’s a waste of time and I should be more aggressive…. however, the folks who I witnessed getting over aggressive went flying over the cliff last time.

It’s going to be an interesting end of 2007, that’s for sure.

{ photo: pop by lou and magoo via CC }