We are seeing the first signs of a bubble in the hi-tech industry, like in early 1999. These signs can be well seen in the vast amount of start up companies and the excellent job market. The over valued stock market of the previous bubble isn’t here yet, but the steam is rising.
We are seeing the first signs of a bubble in the hi-tech industry, like in early 1999. These signs can be well seen in the vast amount of start up companies and the excellent job market. The over valued stock market of the previous bubble isn’t here yet, but the steam is rising.
The job market is excellent nowadays for software programmers, especially for those with web expertise. I have personally felt it here in Israel in August. The papers are full with stories (Hebrew link) about companies offering very high salaries, and hearing their candidates say that they’ll “think about it”.
Tiny Israel isn’t the only place where the tech job market is hot. In the UK,web developers are in high demand as well. And of course, in the US, especially in Silicon valley (where most of the action takes place), there is enough evidence of a very attractive job market, with excellent predictions for this year.
But the stock markets are relatively solid. So where does the money come from?
Venture Capitals are pushing lots of money into startups, many times for companies who have many competitors in a very small niche. For example, the photo slide show creation field is quite crowded. FilmLoop fired most of their workers in an early stage, but there is still too much fuel out there.
Raising funds via VCs is not only for young start ups. IPOs are harder to make today than in the Bubble 1.0 days. To bypass it, some companies raise a significant cash from VCs. Brightcove got $59.5 million from investors! This kind of money is more typical to IPOs or acquisitions. Brightcove is a video sharing site, like Google’s Youtube, Metacafe, Daily Motion, and approximately 200 others. Brightcove has to be very very special for this sum.
And what about the bigger Web 2.0 companies that are trading? Yahoo, hit by competition and problems in management, has a price to earnings ratio of 35, which is not too high, but shiny Google has a P/E of 62 – overpriced (unless you believe this conspiracy theory).
Michael Arrington’s interesting post on TechCrunch explains why Web 2.0 isn’t a buuble. I see things differently and I do think we are seeing the early signs of it. Todd Dagres has a few more good arguments here.
How will we know when it bursts? Dave Winer says that signal will be the crash of Google’s stock. I disagree with him that Web 2.0 is totally dependent on Google, but I think its a good signal.
When will it happen? Well, prophecy is fools, but nevertheless, I bet that 2007 will see big growth in Web 2.0 activity, and that Bubble 2.0 will burst in the spring of 2008.
(I do hope that I’m wrong…)
