(Saturday, October 29)

Dont invest in the bubble

I didn't believe it was a bubble until now. I got to admit, I thought myspace.com was a waste. After doing the research, I can see where Rupert might think it is valued above half a billion dollars. (Rumor has it it sold for 800million). I thought it was over blown, but it was Rupert looking for an in for the net, and I figured maybe I was just not seeing some inherent value. Then Weblogs sold. I don't know the figures, but if the little 'This blog is worth' meme tells me anything, I am not the only one that thinks that whatever it sold for was an insane price. Don't get me wrong, I see where the traffic might be from. I see the number of eyes, but maybe an adsense model was making decent money, so I gave it the benefit of the doubt also. Maybe I was just missing the value. Then came the story that a VC backed digg.com for 2.8 mil. Don't get me wrong. I love Digg. I think it is a great idea, and I do visit it generally once a day to see things. But 2.8 mill? For a news aggregator? not just an aggregator, but a socially constructed one? Where is the profit going to come from? I think it is surely more hyped than /. (and much more bearable to read without the griping) but 2.8 million? !!?!? The only thing I see that might be making them money know is the adsense and sponsorship from the podcasts. To the tune of 2.8 million though? No way. I started reading through the comments on the story (it was dugg of course) and two things pop'd into my head a.) What are they going to patent? What is the inherent value of the site? News Aggregation (been done for along time, look at Fark). The Ajaxian stuff? (also been around for awhile, its great UI, but nothing that is 'theirs' function wise (excluding design)) ? So what�s left? Are they going to try to patent the rating of stories (value of the dig) and apply it to other submarkets. Has that not been done all over? Displaying user submitted content based on some value has been done for a long time. Look at search engines. That toolbar you install is there to watch 'how' you surf, not just 'what' you search. Applying a value to members of a set based on user submissions isn�t anything new. So what is the killer money maker going to be? Conversion to a social network? That has been done all over the place. That�s not anything new. So what is the money maker? I honestly can't figure it out. b.) Do people (ie the people writing the congratulations comments) understand that they had just as much of a role in Digg making 2.8 in VC as anyone? Do they understand that (as of now) Digg makes money off adsense and advertsing that comes from user submitted content? I read a great argument about Flickr earlier in the week, and I really think that social generated content is the web 2.0 bubble. Don't get me wrong. As a developer I love the new level that APIs are operating at. I think it�s great that the "web 2.0" is a somewhat open one, and is based around organization. But do people really realize that the bulk of the content that these marketing and advertising programs are applied to is user generated content. The author of the piece I am referring too believes that he should be getting a part of any money Flickr is making off ads that are hosted by them of his pictures (his user submitted content). (The reason this piece caught my eye is because of it's reference to virtual economies). Don't get me wrong, he agreed to the service at some point, and of course they should be able to make money with his agreement, but it just seems that user generated content with and open API and a simple nice ajax interface is making people millions. I am honestly glad it is, but I would hate to hold and investment in the people making these investments. I just don't see the 'What is the inherent value of the company to us?" being asked anymore. It seems to be 'Where is the hype?'. Once they attain control over the 'hype site' it is going to drop like a rock. It will take people awhile to figure out 'how' to make money with the site, and by then something newer and more 'hyped' will have pop'd up. if you get a chance take a look at this article that sums up nicely the different kinds of bubble 2.0 apps that are coming out. I personally am glad that there is starting to be more investment in companies like this (it provides developers jobs). But in looking at a lot of this from a business perspective, it really does look like a bubble again. It also almost seems like it is tied to 'content hoarding by websites' specifically for the application of content identifying advertisements (like ad sense). Content is king and should always be in the search world. But in the marketing world? In the investment world? It sucks that someone would invest in something just on the whim that the content will be relevant to what people want to lay eyes on in the future. The funny thing is that the people I would blame this on would be the people who created this model of payment which would be Google in relation to adsense. If the payment gods pay for clicks on relevant content, then the more content the better (user generated or not). But what�s funny is that I seriously think that Google knows that one day people are going to sit down and say "Why on earth am I paying this much for advertising centered around this specific end of the tail subject matter?" Their answer to this is base.google.com (they knew it was coming). I will explain more about that in another post.