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.

Web Based Video Games?

Here is an interesting development. Everyone knows that console video games are a huge business. Now, Barry Diller and IAC/InterActiveCorp want to serve them over the web. I'm rather sceptical that "console quality" will be anything better than the game sites currently available now. But Barry is a pretty sharp cat....right?

Diller's IAC Pulls Trigger on Videogame Venture

In a challenge to the videogame establishment, Barry Diller’s IAC/InterActiveCorp said on Tuesday it will launch an Internet service that it claims will offer the first “Web-delivered gaming system.”

IAC said the service will use peer-to-peer technology to render browser-based computer games with graphics that approach those in high-end consoles, such as Microsoft’s Xbox and Sony’s PlayStation 3.

IAC’s announcement follows the company’s two-year effort to buy a gaming company, which culminated in its stealth investment in Eugene, Oregon-based GarageGames in the first quarter.

Mr. Diller’s company said GarageGames’ P2P technology will be wrapped into a new IAC unit called InstantAction, which will serve up a variety of in-house and third party web-based video games.