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This article was published on February 21, 2011

Boom or Bust: Broadband and Social Media will save Dotcom 2.0

Boom or Bust: Broadband and Social Media will save Dotcom 2.0

Sometimes, it seems, humans are destined to repeat the same mistakes again and again. DotcomBoom

The Wall Street crashes of 1929 and 1987, the savings and loans crisis of the 1980s/1990s and the recent financial calamity certainly seem to suggest that when it comes to money, lessons aren’t being learnt.

Likewise, the nineties Dotcom boom may have been exciting for some, but the fallout from it wasn’t quite so exciting for those caught in the middle of the storm. The 10th of March, 2000: the day the bubble burst and the digital dream died; for some, anyway.

In many ways, they were very innocent times. People were still getting to grips with ‘the Web’, dawdling dial-up was widespread and Mark Zuckerberg was still at school, laying the foundations for his future world domination. Ultimately, many of the ideas during the original Dotcom were either poorly planned or simply too advanced for the technologies people had at the time.

So here we are, in the midst of another major Dotcom boom and things are looking rather rosy, aren’t they? The startup scene is flourishing, both in Silicon Valley and elsewhere, and crazy figures are once again being bandied about.

Facebook is valued at $52bn, Groupon knocked back a $6bn offer from Google and investors everywhere are clambering to get their piece of the pie. Doesn’t all this sound familiar?

Indeed, this influx of investment for web-based startups is at least partly responsible for some of the crazy figures going around. With so many keen investors, this has a tendency to push valuations through the roof.

Quora was launched by a handful of ex-Facebook employees. After the first-round of funding, which reportedly brought in $11m, the company was valued at $86m. That’s incredibly impressive for a company with just a few employees.

To use a similar example, Foursquare was valued at $95m with under thirty employees. Twitter has been valued at $10bn, despite it producing not too much in the way of hard profit yet. Though Biz Stone has personally rubbished this valuation, even if it is just to stop his friends from thinking he’s a billionaire.

Some might say these grossly over-valued businesses are destined to drive the current boom the same way it went over a decade ago. It might do, but not anytime soon. There’s no doubt there will be plenty of failures this time ‘round, because too many companies are trying to do exactly the same thing, as we’re seeing with the army of Groupon clones fighting for business.

But with any business venture, it’s all about the foundation. During the first Dotcom, there was a real sense of urgency to make big bucks, but not enough urgency to put the plans in place. With weak foundations, they crumbled.

Dotcom 2.0 is much stronger than its predecessor. People are more technologically savvy and, crucially, broadband and smartphones are approaching ubiquity. The world is switched-on, tuned-in and can’t get enough Internet.

Technological advances aside, the one thing that will ensure we don’t see another Dotcom disaster is social media marketing. The key to success this time lies in finding ways to monetise the many ventures – it’s understood that driving traffic isn’t enough, which is why Twitter is actively seeking ways to drive its revenue. In fact, Twitter may make as much as $150m this year, according to some reports.

There’s no question there are a lot of over-valued companies out there at the moment; some will undoubtedly crumble and some will flourish. But Dotcom 2.0 isn’t a bubble, and it won’t burst.

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