Tuesday, November 13, 2007

Web 2.0 Bubble? Reason #1

After reading my last post, I decided it's time to find some reasons the web 2.0 might be an unsustainable bubble.

Reason #1: not enough ad dollars to go around...

From StrategyEye (a newsletter I recommend subscribing too):

Publicis CEO Maurice Levy is warning that too many new media companies are relying on advertising for their business model, reports the FT. "Everyone is seeing advertising as the manna," says Levy. "Far too many people are building plans based on advertising and they may well be disappointed because there is not enough money for everyone." Levy likened the growth of web 2.0 businesses to that of internet companies prior to the dotcom bust. "Now everyone building a Web 2.0 operation believes he will receive the advertising," he says. IAC/InteractiveCorp chairman Barry Diller, meanwhile, says that Microsoft's USD240m investment for a 1.6% stake in Facebook reflected not as much a USD15bn valuation of the site, as a strategy by Microsoft to prevent Google from snatching the stake. "If it's real money it's insane," he says. Paris-based Publicis has made several acquisitions to boost its digital marketing portfolio in the past year, of which the largest deal was its takeover of Digitas in Dec 2006 for USD1.3bn.

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