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The Dvorak Bubble is about to burst

Thursday, 2 August 2007 rant

Dvorak is a complete nonce. I mean that in the kindest possible way because sometimes he’s hilarious to listen ranting on and occasionally I happen to agree with him but now he’s predicting the second downfall of the Internet…

Dvorak is a complete nonsense. I mean that in the kindest possible way because sometimes he’s hilarious to listen ranting on and occasionally I happen to agree with him but now he’s predicting the second downfall of the Internet; the second bubble bursting.

For those that weren’t around (or, at least, not paying attention) to witness the original dot-com bubble, I’ll fill you in on the basics: venture capitalists went crazy over the internet. They started buying up sites that looked like they had potential for ludicrous sums of money claiming that they were all going to be the next Microsoft.

This interest spread over the rest of the investor circuit and before you could say “I wonder if this will last”, dotcoms were all over the stock exchange. The furore made investors buy like mad.

This, in turn lead to VCs buying more and more companies based on future prospects, not caring about how a site would make money, just that it looked like a good idea. They poured ridiculous amounts of money in to lavish headquarters and expensive technology to drive their beasts.

NASDAQ Composite index

March 10th, 2000 saw the peak of this monstrosity and after the weekend saw it’s rocky decline. It plummeted so fast that within a year, the value of the whole NASDAQ Composite index had halved. It kept falling all the way to 2003 due to lack of investor confidence.

There are many suspected causes for the bursting but they’re not relevant to what we’re talking about. The whole reason there could be a bursting is that people were blindly investing in companies that had no real merit and were only invested in out of fashion.

Enough history… More Dvorak

Right. So Dvorak reckons the second bursting is both inevitable and nigh. He cites several sub industries of the technology sector and gives reason why they will crash and burn. Lets look through and criticise.

  1. Neo-social networking
    — Dvorak: “Today everything from YouTube to the local church has a social-networking angle. […] This scene is totally out of control and will contribute to the collapse for sure.”
    — Me: What are you talking about you strange man? Social aspects mean real sticky value (god, I used a marketing term… somebody put me in a chemical bath) people don’t invest in something because it has this feature, they invest because people use it!

  2. Video mania
    — Dvorak: “mania. With dozens and dozens of YouTube clones cropping up to get on the “throw money away” bandwagon, you must sense that the eventual shakeout in this space will have a negative impact.”
    — Me: Okay, I agree. There is too much choice and video is wildly non self-sustainable some are going to close shop but I hardly think it could cause any sort of technology stock bubble burst.

  3. User-generated content
    — Dvorak: “This idea has been around since Usenet and just keeps improving. It will make no contribution to the overall collapse except for users reporting the collapse.”
    — Me: Again, what are you talking about? This will be here until there are no more users on the internet. It has nothing to do with a bubble of any sorts because it’s mostly all very individual.

  4. Mobile everything.
    — Dvorak: “… It cannot trigger a collapse since it will never fully get off the ground …”
    — Me: It will never cause a bubble burst unless people invest stupid sums of money in it. If you ask me, watch this market in 5 years time because it really will be the future.

  5. Ad-leveraged search.
    — Dvorak: “Most search engines will fail as a matter of course. This segment of the industry is mundane. It would be affected by a crash but not trigger one.”
    — Me: Where have you been, John? Most search engines have already been annihilated by Google. It’s the product that counts these days.

  6. Widgets and toolbars.
    — Dvorak: “”
    — Me: Eh?! Yeah because there’s massive stock market investment in toolbar companies. Jesus, hold the phone, I’m just going to invest my life savings in a toolbar company

It’s just a completely different set of circumstances than it was back then. People aren’t floating their companies based on future maybe profits. Investors are looking for the business model and how realistic it really is.

No one site collapsing is going to take the rest with it… With the exception of Google, perhaps; oh go, that’s cursed now… Anyway, yeah. Business is booming and for good reason: we’re making stuff rather than ideas. Investing is done without too much hoo-har and sales are mainly to other industry players collecting tech IP.