Web 2.0 in a downturn economy

I was at techset las vegas about 3 weeks ago and while doing an interview with Miiko of future works I was asked “with the current state of the economy how do you think web 2.0 will fend?”

I was happy with my response, however, as the economy fell on it’s face over the last 2 weeks I found myself thinking more and more about the survivor-ability of web 2.0.

A lot has happened in the last two weeks, Iceland claimed bankruptcy, Obama and McCain completed their final debate and web 2.0 companies seemed to get their first taste of the cutbacks. I read about companies like Jive software, mahalo and jaxtr who have cut large portions of their team.

On the other hand there were the slew of companies that closed their doors for good. In fact I actually saw it very closely. Last week my company hosted an open wine-bar event for the San Diego tech scene of which most attendees were from either SuggestionBox or Eyespot. Both companies closed down completely.

Despite the influx of bad news I don’t think web 2.0 companies should worry, at least not the innovators and the uniques and especially not the value add companies. The copy cats, “wheel decorators”(companies that are re-inventing a product but making it prettier) and useless social apps (the let’s make our slightly useful app into a social network) should beware. Additionally the non revenue stream startups should look out too because the good old story of “go viral and make millions from aftertising” is struggling and somewhat flawed.

I think what we are seeing is the result of a bloated and saturated sector fused with a poor economy. Let’s face it there are hundreds of new web 2.0 apps launching each month and some of them are just plain worthless. Perhaps we will see a more legitimate product offering during the recession, where entrepreneurs, a very flexible term these days, begin to actually consider the usefullness of what their building.

Even though web 2.0 as a whole will feel the pain of the currently horrendous economy, I believe that fundamentally the valuable part of web 2.0 will thrive. As mainstream companies begin to feel the squeeze of the economy the big “where can we make cuts” question will loom over many shoulders. Some companies will make cuts whereas others will seek more efficient and productive solutions in order to increase the capabilities of their workforce, or they will find alternative cheaper solutions to stretch their services further for less. The latter two scenarios should sound familiar because they describe the core benefits of web 2.0: fast, easy, adoptable, efficient, cheap, agile, scalable and valuable software.

Ultimately valuable web 2.0 services may become the Plan B for struggling traditional companies. To save money they may need to explore VOIP instead of ATT or Verizon and they may need to do web-based phone conferences to limit travel costs. They may need to centralize file sharing and collaboration efforts to make their employees more efficient and they may need to test the waters with social networking tools to compliment a more limited business networking event schedule.

Damien
@DamienH

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