Novak Biddle Venture Partners, Jack Biddle - VC Predictions 2007

Web 2.0 and Google Both Collapse; Institutional Investors Realize Investing in an Important Space Isn't the Same Thing as Actually Making Money

(note: this is the fourth and final post of a series of VC predictions for 2007)

By Jack Biddle, Novak Biddle Venture Partners

1st Half 2007

1. The web 2.0 advertising model collapses when people realize that Google is every bit as smart as they are cracked up to be...and don't have a nickel of EXCESS margin left for their 'partners.'

2. Google collapses when Advertising Inc realizes 'bots' are accounting for most of the page views...and bots don't buy stuff.

3. Institutional investors realize that 'participating in an important space' is not the same thing as actually making money...and they don't like losing money, which they are now doing in spades.

4. Shortly after.... VC's have the same cathartic revelation. Between their grasping for air they repeat the phrases 'long term...patience...long term...patience'...while LP's repeat the phrase 'T Bills are positive...T Bills are positive."

Here is What VCs Face the Second Half of 2007...

Old school becomes fashionable again.

1) If this was easy, everyone would do it

2) When everyone does it, its too easy

3) When its too easy, no one makes money

So my prediction is that the smartest people on the planet will continue to beat each others brains out to no net good end for another 2 quarters, until being a doctor, or a lawyer, or an investment banker is hands down the coolest and most lucrative gig.

When venturing is about money, no one makes a dime. When venturing is about pioneering, because pioneering is cool, a lot of innovation takes place.

My prediction is that by the end of 2007, people won't venture for profit. They will venture to do really cool things, because they can.

And 10 years later... the best of the best will get paid despite the fact they had the time of their lives.

Comments

[Alan Rimm-Kaufman]

"Google collapses when Advertising Inc realizes 'bots' are accounting for most of the page views...and bots don't buy stuff."

Errrr... all serious Google advertisers track sales, and the sales are really there. The clicks are converting. Real customers, real credit cards, real orders, real revenue.

If the clicks don't convert, the advertisers cut those ads quickly.

Taking Holiday 2006 for example, across a large portfolio of B2C and B2C search clients with significant Google spend, we saw strong conversion and profits.

Recent data and discussion at

http://www.rimmkaufman.com/rkgblog/2007/01/02/holiday-2006-sales-performance/

and subsequent posts.

So while I agree with your "First Half" 1, 2, and 4, and with your "Second Half" 1, 2, and 3, respectfully, I think you're off base on your "First Half" #2.

Cheers --

Alan

[Andrew Scott]

A nicely concise article and great read! I'm with Chris Comella and sure that 'most' page views are bot driven, but there is certainly a backlash yet to be had about clickthrus and spam/fake clicks. Meanwhile, lets hope your last prediction is right, as we're doing all sorts of fun stuff ;-) Cheers,
Andrew, Founder www.playtxt.net

[chrisco]

Interesting, but way I think at least a little exaggerated:

1) The advertising model is not going to collapse. Advertising dollars may shift around, rise and fall, but the model will not collapse.

2) I don't think any/many of us knows for sure, but I doubt botnets account for "most" page views.

3) I think most institutional investors know that 'participating in an important space' is not the same thing as actually making money. Those that don't will soon be looking for new jobs.

Cheers!
-Chris Comella, Founder
BuzzPal - The World Is Your Party
http://www.buzzpal.com