A Bump in Web 2.0's Road

For all the  glory that is Web 2.o and the celebrated tech start-ups of Facebook, MySpace, Twitter, and LinkedIn, their appears to be a darker horizon then originally anticipated. Correlating with the current economic recession, hot tech start-ups are beginning to twindle and their valuations fall. Perceived once as impervious to the economic downturn, tech start-ups of the famous Silicon Valley are facing hard times. It has become increasingly difficult for such firms to gain the necessary funding. Not only that, companies such as Digg, have had their valuation drop like a rock.

But why are the once bullet-proof companies coming on hard times? The answer is revealed beyond the glitz and glamour that is web 2.o. While the platform idea has transformed how the Internet is conceived and the way a generation interacts, the profit-margins have come slowly. When giants such as Facebook and Digg have failed to turn a dollar in the black, something must be amiss. The culprit: venture capitalists looking for the next Google. They want to be apart of the next “Big Thing.” Unfortunately, such zeal for making the quick buck has resulted in investments in”hot idea” tech with little in the way of a legitimate revenue model.

The bottom line is that the economic recession is forcing venture capitalists to rethink where their money is placed, in turn forcing tech start-ups to carefully model a business and company on a solid foundation. Such a benefit will only improve the future of web 2.0 and get it beyond this little bump in the road.