Some commenters are calling it sour grapes, but Greg Linden’s prediction of a rough year for Web companies touched a nerve …
Linden, a University of Washington alum and Amazon.com vet, started Findory, an online news site that folded last fall after a three-year run.
But his post today is more thoughtful than bitter. I wonder how much it captures concerns that other entrepreneurs share, but aren’t voicing while they’re still giving it their best shot.
A few excerpts:
We will see a dot-com crash in 2008. It will be more prolonged and deeper than the crash of 2000.
The crash will be driven by a recession and prolonged slow growth in the US. Global investment capital will flee to quality, ending the speculative dumping of cash on Web 2.0 startups.
Venture capital firms will seek to limit their losses by forcing many of their portfolio companies to liquidate or seek a buyout. Buyout prospects will be poor, however, as the cash rich companies find themselves in a buyers market and let those seeking a savior come face-to-face with the spectre of bankruptcy before finally buying up the assets on the cheap.
Not just startups will be affected, he says:
The big players will not be immune from this contagion. Google, in particular, will find its one-trick pony lame, with the advertising market suddenly stagnant or contracting and substantial new competition. The desperate competition with dwindling opportunity will drive profits in online advertising to near zero. Google and Yahoo will find their available cash dropping and will do substantial layoffs.
Linden goes on to speculate that companies will then do more obnoxious and intrusive ads, making the Web less pleasant for a while.
If Linden’s right, then welcome to the party. Newspapers are suffering from a similar contagion and haven’t yet found a cure.