And so it starts.
Marc Andreessen
(Credit: Seth Rosenblatt/CNET Networks)Earlier Friday, analysts lowered estimates on Amazon.com and Yahoo, setting off renewed worries about the earnings outlook for Internet companies. The Nasdaq finished Friday in the red, even as the Dow Jones climbed back from an early morning sell-off with a triple-digit gain, ostensibly, on hopes that Congress would come up with a financial bailout plan.
What to make of all this? Up until lately, most of the people involved in Internet companies (and particularly, Web 2.0 types) shrugged off the gyrations in the financial markets as Wall Street's problem. The standard refrain was that the Internet economy "is a lot different."
Well, not really. Go back a few years and you'll find that was pretty much the same line of jive peddled by the folks pumping Internet stocks. That lesson got learned the hard way. Fact is that the economy is intertwined and the ripples--both for good and ill--touch every sector. So it was that more than a few of today's current class of born-again pumpers snorted derisively when Marc Andreessen last year quipped that Ning's decision to raise $60 million in private equity would prove handy during the coming nuclear winter. They're going to eat their words before long.
Talking about his August channel checks at Amazon, Lazard Capital analyst Colin Sebastian reports that online spending trends "remain challenging" and may have deteriorated since then. Citing a customer survey by Billme, an Internet payment services provider, Sebastian notes that almost half of the consumers polled said economic uncertainty had convinced them to delay purchases, with 42 percent saying they intend to cut back on credit cards. What's more, Sebastian expects competitive holiday promotions to hit even earlier than usual.
Was there any good news out there? Well, sort of. "We continue to believe that e-commerce growth should outpace brick-and-mortar retail as consumers seek better values online and are now more accustomed to shopping online for the holidays," he wrote.
Meanwhile, Collins Stewart analyst Sandeep Aggarwal's dismal note on Yahoo easily could apply to any number of advertising-dependent Internet companies:
We believe that the fundamentals at YHOO are deteriorating. On the one hand economic headwinds and turmoil in the financial markets are causing weaker display ad revenues. On the other hand changes with the minimum bid with search and a possible GOOG/YHOO deal are causing an outcry among many advertisers. To further complicate the situation is an ongoing loss of talent which might accelerate with the renewed restructuring efforts. We don't see any near-term upside in the shares of YHOO on fundamental basis. However, we would not rule out a possible MSFT/YHOO deal in the future.
The evidence is piling up every day. During the just-concluded Advertising Week conference in New York, Wenda Millard, the co-CEO of Martha Stewart Living Omnimedia, said during a panel that the financial crisis is going to reverberate through the economy with "pretty severe implications for medium-sized and smaller businesses and consumers."
The venture capitalists who've invested in sundry Internet start-ups (most with unpronounceable names) are spinning this as a passing event. Once Congress and the president agree on the $700 billion bailout (or rescue, if you prefer), we'll return to normalcy. Suuure.
I can't put it any better than did AllThingsD's Kara Swisher's recent post, where she wrote that "the economic crisis is likely to become a whirlpool that will be hard for any ad business to avoid, even the often recession-proof digital sector."
Translation: It's only a matter of time before the stuff hits the fan in a big, big way.
Marc Andreessen
(Credit: Dan Farber/CNET News.com)The rumors have been floating around for a while, and now Mike Arrington is reporting that Marc Andreessen is going to join Facebook's board of directors. (Kara Swisher had the original news break back in May.)
Best known as the founder of Netscape, Andreessen these days is involved with Ning, which supplies a platform for "white label" social networks that you can brand as your own.
We'll try later to get more clarity about how all of this is supposed to shake out.
If the move indeed goes down, Facebook will pick up a plugged-in entrepreneur who can share war stories about the successes and mistakes that defined Netscape's relatively brief moment in the sun before Microsoft got serious about competing. The good news for Mark Zuckerberg is that Facebook doesn't (yet) face a rival on that scale.
Maybe it's a throwback to my childhood recollections of "duck and cover" school drills, but this nuclear winter Andreessen thing is still rattling around in my head.
First, the gloomy view: The economy is slowing down and so what's up with the increasingly pointless me-too social-networking apps getting link love these days on Techmeme? They're cute, but outside of the echo chamber regulars, who really cares? Let's be frank: The world does not need another social news aggregator or online scheduling assistant.
(Credit:
CNET News.com)
Now, the slightly more optimistic view: This isn't the first time that caution is the byword, and it won't be the last. Silicon Valley survived the Internet bubble, so why should anyone believe that it won't get through another recession?
What's more, the tech business is doing well. And the recent run of earnings announcements from the likes of Intel, Apple, IBM, Google--and even Yahoo--suggests that while folks may not be buying lots of houses, they continue to buy lots of computers.
Still, there's no getting around the fact that advertising will be hit hard in any recession, and that would be bad news for the prototypical Web 2.0 start-up. Here's where it starts to get really interesting. The definition of your prototypical Web 2.0 company is undergoing a change from what it connoted in 2005. Browse through the roster of companies exhibiting at this week's Web 2.0 conference and you'll find enterprise-heavy names like IBM, Microsoft, Oracle, and Cisco-WebEx, among others.
We've seen this movie before. The history of the computer industry is chockablock with examples of smaller, innovative entrepreneurs shaking up the status quo to the point where the mainstream companies either figure out how to coexist in the new world order or pass the baton.
I don't know where we are in the transition, but there's no getting around the fact that the constellation of forces in software is shifting. Companies like Twitter still draw more comment in the blogosphere, but look what's happening with Web 2.0. We're now in a phase where bigger hardware and software companies with deep pockets are starting to predominate. (In many cases, because they buy up innovative start-ups to get into the game such as AOL-Beebo. Other times because they come up with new technology models like Microsoft's cloud platform push with Live Services and Live Mesh.) Lots of reasons behind the enterprise companies' interest but maybe it boils down to something as simple as companies just trying to stay relevant. Fact is that as more young people graduate into the work place, the new generations will import online habits they learned growing up into their work routines.
In a recession, they'll fare better in any storm than companies which don't have an apparent exit strategy, according to Barry Schuler, a former CEO of America Online and now a private investor.
"With social media, no one's figured out how to monetize things yet," Schuler said. "In a certain sense, it looks a lot like 1997. The hiccup will be if there is a recession. The least proven stuff, the companies that haven't decoded a business model, will be the stuff that gets dropped. If there's one thing we learned through the Internet bubble, you can say this is a new economy, but in the end, P&L does matter."
We're fast approaching a point where it's time to find a more fitting sobriquet. Better yet, maybe we should just dump an awkward marketing umbrella term entirely. It just gets in the way of clear thinking.
SAN FRANCISCO--So there was Marc Andreessen, scaring the bejeesuz out of the crowd at the Web 2.0 Expo here with talk of a "nuclear winter" descending upon techdom. Maybe it was the Lex Luthor resemblance that made it seem extra sinister.
Marc Andreessen: Watch out or...kaboom!
(Credit: Seth Rosenblatt/CNET Networks)For the record, this line is becoming old hat for Andreesen--in a blog post he wrote after Ning raised $60 million net in a private round of funding, Andreesen said the money would "enable us to keep scaling given our accelerating growth (more than 230,000 networks on Ning now, growing at over 1,000 per day) and to make sure we have plenty of firepower to survive the oncoming nuclear winter. At current growth rates, we don't need it to get to cash-flow positive, but having lived through the last crunch, it's good to be conservative with these things."
Nothing controversial about being conservative in uncertain times. Still, a nuclear winter? Author and Oxford professor Jonathan Zittrain followed Andreessen onstage--via a recorded transmission --by pondering grim Internet scenarios lurking just over the horizon. The odd thing is that I've heard similar hedge-your-bet comments all week. This is a crew that survived the last bubble and they know from firsthand experience that a lucky rabbit's foot won't be enough to get by in case lightning strikes twice.
The knock against Web 2.0 is that it's chockablock with me-two, doodad makers, companies fated to blow away like prairie grass at the first sign of a storm. Some of that is true. But when you walk the floor at Web 2.0, you see that this year's conference is dominated by serious companies with serious products: Disney, IBM, Intuit, Microsoft, Cisco-Webex, Oracle, Juniper, Google, EMC--well, you get the idea. (You can find the full list in the program guide.)
Barring a real nuclear winter, I expect they'll still be around for quite some time.
So why the lingering insecurity?
"I think it depends on your perspective--that is, where in the market you are in terms of the growth curve and users," said Kaku Srivastava, general manager at Flickr. "From where we're sitting, we're bullish."
That's true. It's also true that many of the smaller companies are ready to grab the first good offer that comes their way.
"You look at CPMs for a lot of the social-media platforms we work with and you wonder about the CPMs," said an executive who asked to remain unidentified. This guy was one of the smart ones: he took the money last year and decided to hang around the mother ship--at least for the foreseeable future--and run the division. "Unless they run a very small shop, it's going to be really hard for them to make serious money. But that's the dream that drives everybody so, why not?"
Why not, indeed? After all, it worked for Andreessen.
High on my short list of why I love the Internet, there's the oh so unscripted Marc Canter.
A big, gutsy developer, the guy remains refreshingly candid after all these years and willing to brave his opinions without hiding his agenda.
Canter: Taking a zing at Ning
(Credit: Dan Farber)Then there's the very scripted Marc Andreessen, another charter member of the digerati, but one who rarely utters a syllable in public these days without first figuring out how it's going to play.
So it is that Marc the Raucous has now called out Marc the Marketer for publicly "pimping" his company.
The kerfuffle began after Andreessen wrote a piece on his blog trumpeting how the Ning service he co-founded now features "200,000 social networks." But Canter, who runs a Ning competitor, let Andreessen have it for what he saw as transparent PR puffery:
"When is a social network NOT a social network? When it's part of Ning's 200,000 social networks! Give me a break Gina and Marc! STOP bragging about how many people have clicked and created a network. How come you have NEVER posted anything on: how many networks have 5 or more people in them? How 'bout 50 people in them? Or 500 people? Bragging about 200,000 networks with one person in it - is absurd. And I don't even care if they're porno networks or not! But they're NOT networks if they're less than what? 5? 10? 25 in them? You're obviously pimping yourself up for a sale. Give us all a break - please!"
Andreessen: Go ahead, make my day
(Credit: Dan Farber)I've been on Ning since its inception and found it to offer good tools and a capable platform for people who want to private-label a social network. The biggest question concerns its staying power. Ning faces a lot of competition. Andreessen may hope Ning is en route to becoming the next Facebook, but that's a stretch. The more likely outcome is that Ning winds up like GeoCities and gets sold for a bundle to a big media or software company.
Ning has benefited enormously from the connection with Andreessen, who pocketed big money from his work helping to start Netscape and Opsware. His is also a marquee name that gets reporters to notice and, more importantly, opens doors at venture capital firms.
So it was that last summer Ning raised $44 million in a third round of funding. But that same announcement also raised eyebrows in some quarters about the company's valuation. Privately held, Ning isn't volunteering details about its business--nor does it have to. At this point, determining the size of the respective Ning social networks remains in the realm of guess work. And Andreessen, obviously keen to maintain a drumbeat of interest, can say whatever he likes. Thus Canter's piquant post. (For more on the company, here's a recent video interview that CNET's Dan Farber and Rafe Needleman, conducted with Ning's other co-founder, Gina Bianchini.)
So far, Ning is the site putting up the serious numbers. Canter's Broadband Mechanics, which does not market its products directly to end-users, functions as a so-called white label for social-networking and blogging platforms. Canter, the company's CEO and founder, told me that the public site is a demo site "and as a demo site, it's got 10,000 names registered. One thousand of them have clicked and said, 'Make a network.'" However, he added that none of the sites using Broadband Mechanics' meta networks is yet available to the public.
I tried reaching the Ning folks for comment, but they decided to take a pass. Well, Marc (Andreessen, that is), you have my phone number just in case you have second thoughts.
- prev
- 1
- next
