Bubble Crunch

Michael Arrington has released one of his classic posts in which he sums up the current state of Web 2.0 and gives short shrift to the bubblemongers out there – a few failures are direct evidence that we are not in a bubble and that the private venture markets are actually in the process of letting off a little steam to keep things rational.

I agree wholeheartedly with Michael. He sums the situation up perfectly here:

So every time a startup dies, I don’t think it’s evidence of a bubble about to burst. I think it’s evidence of a market that is working exactly as it should. Most companies fail, but enough win to keep the whole ecosystem healthy.

Michael also has a good riff about the network effect:-

The Network Effect is still the most powerful force driving Internet success today. People don’t, for example, go to Digg because it has great software. The original Digg, as launched, cost Kevin Rose less than $2,000 to create. Anyone can create a Digg clone, and many have. The reason Digg is, and will continue to be, successful is because of the community it has created. People go to Digg because everyone else goes to Digg, and every new user who submits stories and/or votes occasionally adds value to the whole network. The Network Effect is also driving Facebook’s success, and YouTube’s. None of these companies have interesting software. All of them have an incredibly valuable community. All of these companies have to work hard to keep their lead, but it is nearly impossible for new entrants to catch up.

Nice article, Michael – this is what we want to see more of.

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