There is talk of a new Internet boom. The so-called bubble 2.0 is the reincarnation of the Internet bubble of the late 1990s, complete with a new generation of Internet billionaire hopefuls, some of whom will certainly pique the curiosity of investors. However, if the effects of the former bubble’s bursting are also to be repeated, those investors should remain wary.
A new Internet bubble like that of the late 1990s is expected to surface.
The late 1990s bubble reached such dizzy heights that, at its peak, start-up companies were fetching billions of pounds in their initial public offerings (IPOs). The downward slide that followed was inevitable, and when the bubble finally burst, many investors were left with nothing but foam on their faces and the ensuing recession took many years to shift.
Now there is a new generation of entrepreneurs or ‘wannabe Internet billionaires’ looking for financial backing, and they are joined by venture capitalists returning to the market in search of the ‘next big thing’.
This time, though, the setting is different. The web, or web 2.0, has evolved into a computing platform for web applications. We are also witnessing a change in both the supply and demand sides of Internet-based services.
The change is coming about as a result of a new generation of software applications based on open standards and application programming interfaces (APIs), web services, collaboration, and federated identity management. At the same time, broadband, 3G, wireless, and mobile devices are bringing users information and services on demand. Consumers are responding well to these developments, as the massive increase in Internet shopping in the run up to Christmas 2005 reveals.
So we have the technology, the entrepreneurs, the investors, and the consumers. Add to this mix the predictions of a bumper year for corporate IT spending, driven by government initiatives and every enterprise’s need for legislative compliance, security, and disaster recovery, then you have all the ingredients for the making of a very big bubble. Investors beware.
Source: OpinionWire by ButlerGroup (www.butlergroup.com)