Posts Tagged ‘Social Times’

How Many Web 2.0 Startups Will Go Belly Up?

September 29, 2008

On September 15, I hosted a panel on advertising and social media the first annual Social Ad Summit, founded by Nick O’Neill. The speakers on the panel are me, David Borstein of MySpace, Bill Alena of, Mike Trigg of hi5 and Martin Green of Meebo.

After the panel ended, I hung around and chatted with Fortune’s David Kirpatrick, who is on leave writing a book about Facebook. I also met two folks from the startups Gigya and Plentitube.

Here’s a high quality video of the panel posted on Nick’s site. I tried to embed the code several times but I couldn’t get it to work. Damn HTML.

While social networks have found it more difficult to make money from their massive audiences than originally anticipated, I came away with the feeling from this panel that a business model will eventually emerge over the next few years. There are just too many smart people focused on the problem. And there’s just too many opportunities to influence people on these networks, with more and more people spending a considerable chunk of time on them. Remember that it took Google a good four or five years to perfect its pay-for-performance business model.

Will some of these sites go belly up during the next 18 to 24 months? Of course. That’s the nature of the business. Creative destruction goes on.

But I’d be surprised if 80% of Web 2.0 startups don’t make it to their next round of funding or profitability. VCs are sitting on a pile of cash. Many of the industry’s brightest minds have staked their capital and reputation on Web 2.0 companies, which means they will be reluctant to pull the plug prematurely. And entrepreneurs and VCs learned a few things during the last tech bust, which wasn’t so long ago that people have already forgotten those lessons. So I’d venture to say 25% to 50% may hit the deadpool–especially the ones that weren’t smart enough to raise a recession round during the last year.