Thursday, December 14, 2006

Why Google, Yahoo and Microsoft should stay away from buying Web 2.0 startups

A couple of days ago, Techcrunch displayed documents reportedly sourced from within Yahoo. The documents, prepared some months ago, included a financial model for projected future advertising performance for Facebook.

Accorrding to Yahoo’s internal forecasts, FaceBook will clock revenues of $50 million in 2006, $172 million in 2007, $346 million in 2008…and $1.4 billion in 2009.

Techcruch also reports that the deal between the two companies broke up, Yahoo offered $ 1 billion and could have gone up to $ 1.62 billion.

Yahoo should have spent that money on Project Panama, which will get it Google-like PPC revenues. Facebook’s crowd is a fickle crowd. Yahoo has done enough Web 2.0 for now.

Now, onto my real reason why Google, Yahoo and rest of the big daddy gang should stay away from web 2.0 startups:

Paying huge amounts of money spoils the mindsets of other entrepreneurs.
I still can’t understand how Facebook’s revenues would triple from $346 million in 2008 to $1.4 billion in 2009. This is straigt out of a fresh MBA's wet dream.

When Google bought Youtube for $1.6 billion, it made all other Video companies and analysts lip their licks in anticipation. Before the Youtube acquisition, we all said that showing videos online is a cost-heavy activity and now everyone seems to have changed their tune.

I am still not sure about the existence of the web 2.0 bubble, but building yet another blog/wiki/video/rating/take-your-pick startup for flipping within 18 months is a sign of trouble. Google and Co. are spoiling the startup field.

It used to be said that the old sent the young to fight and die for their wars. In today’s web economy, cash-rich companies like Google are sending entrepreneurs to a similar. The battle for web 2.0 has already been won – Google has won it. Now, they are putting blinkers on entrepreneurs’ eyes. They see nothing but cash. They don’t see innovation and usefulness, the eternal bottomline.


At 12:04 PM , Anonymous Anonymous said...

Very insightful, I think you nailed it with 'the old sending the young to fight their wars'.

At 4:55 PM , Anonymous Anonymous said...

This is crazy.

8 billion USD for another your photo, your network, your task, etc. site. Have people lost their common sense !

If dot com bubble v1 was seen couple of years ago, this specific case will put everybody to shame.

Investors please avoid these cos. Rather look for real substance like Google, etc.


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