52 Bicycles

Peter Rip’s recent (and rhyming) ”Reflection on the Web 2.0 Inflection” makes a good point that may put the aforementioned New England VCs ahead of the curve - that the money to be made may be in customers that actually pay for software, rather than more-ephemeral advertising models.

I tend to think that the investments, in the form of both institutional risk capital and the time of intelligent technologists in consumer-facing, advertiser-dependent (or “no-business-model-yet-but-Paul-Graham-says-traffic-will-yield-profits-somehow“) ventures are tremendously over-valuing this side of the market, at least, as it is today. There is a lot of growth ahead, but enough 90 degree turns are likely in the near term such that betting on the big win down the road is even riskier than perhaps it was before.

Rip asks whether the air is coming out of advertising. It might be, but evenif it is not, the implicit bets seem to assume huge near-term increases in advertising that all use today’s models, or at least that don’t require adaptation to whatever the model is. So I worry for consumer models that don’t have direct revenue streams.

Which brings me back to the New England VCs and their curve - software for businesses can be a good play that allows the creation of revenue and profits from reliable customers who place value on value - for whom saving money or making money is an immediately good thing, rather than trying to win over the hearts and minds of eighteen year olds deciding on a usurer.

This entry was posted on Thursday, September 28th, 2006 at 9:13 pm and is filed under Technology Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed. Reddit This