Crash 2.0

Working on the internet is so much fun that thinking about money, wages, profit, return on investment just kills the party and should be avoided at all cost. If you really do have to handle that question, maybe if you are on stage at a conference talking about your new video-feed-comparator-social-widget whatever, just say 'we have an ad-funded revenue model'.

If you in a conference audience, and you see some 25 year old CEO/CTO talk about their groundbreaking social-widget-streaming-aggregator-feed thing and they say they have an 'ad-funded revenue model' then note their name and the funky name of their company as they might be available for work in about 18 months time.

Chances are though, you are working for a funky-named company venture capital funded, or a subsidiary part of a larger company. Are you going to be hit by 'Crash 2.0'? Take the pop quiz -

Who is paying my wages?

1. 1. A consumer
2. 2. An advertiser (really)
3. 3. An investor
4. 4. Someone slogging their guts out in another part of my company.

In many cases the answer is c - for the bulk of your wage packet. Many companies are operating and developing on the never-never, a pile of cash provided to them in the expectation their cool idea starts to make money. In reality the payback time is never, because however cool the idea is -

1. Someone else can/is doing it better
2. People are happy to use, but will never pay
3. There is not enough ad dollars to go round

Repeat the last one. Make it your facebook status. Because, while advertising spend on the internet will grow, certainly not enough to keep pace with either the number of businesses clamouring for it or the amount of inventory they are generating. The result will have to be crash 2.0, with the inevitability of gravity acting on an egg dropped from a high rise.

It's that little matter called solvency, which cares nothing for the new media paradigm, the wisdom of crowds, free content and flattened earths.

Crash 1.0 was spectacular - it was all about a speculative rush fuelled by private investors and funds looking to make huge gains and quick bucks. The current wave of investment in 2.0 has been more low-key, fewer expectations, smaller sums, and executed more by well-heeled funds and angels than the guy in the street. Even by some of those who did well out of web 1.0.

Nevertheless, scale does not alter the fundamentals. A boulder falls from the empire state at the same rate as a tennis ball. The process will be less shocking this time, there are fewer illusions. It's like sitting through a horror movie which you've seen before - the ending is predictable. It will also be massively productive.

There is currently so much duplication and so many curiosities which people would be best not spending any more of their short mortal existences on. There will be some survivors, many failures and a lot of people out of work. The reason is will not just be like the normal ebb and flow of business is because there was a definite pick up in activity, funding, inflated M&A, labour tightening/wage inflation around 2004-2005. Those investments are now working to their conclusions.