Friday, January 28, 2011

Return of the Bubble

For months now I have been saying that I do not understand the appeal of Quora and it seems I am not the only one. Recently I have seen articles expressing the same sort of confusion on what all the hype is about. There is even a very funny site (really just a page) called Cwora that pokes fun at the elitist who have claimed Quora as their own.

If you have never heard of the site don't feel bad. It is only a year old but in the last few months it has become the darling of Silicon Valley. On the Quora homepage the service is described as "A continually improving collection of questions and answers created, edited, and organized by everyone who uses it." Sounds like a variation on Yahoo Answers to me. But I will stop picking on Quora since they are not the only start up getting more attention and money than they deserve. The bigger point here is the warped sense of innovation we are currently seeing and the potential pitfalls it could bring.

During a recent business trip to San Jose it was obvious that the mood in the valley is positive. Sitting at lunch one day in a busy downtown restaurant a coworker who lives in the area made the comment "Things are booming again. Three years ago this was a ghost town". Looking around I could see what he meant.While I did not think much about it at the time that experience was a small example of the overall sentiment that is happening in web/tech startups.

Not a week goes by lately without news of another company that didn't exist two years ago and is now in line to be the next Facebook. Just last month GroupOn turned down $6 billion from Google and decided to keep their momentum (and hopefully valuation) growing. And who wouldn't want to be like Facebook these days? With their recent influx of cash the company continues to be the trailblazer in social network space.

But I can't help thinking this all feels a lot like the tech bubble of the late 1990's that burst so fast by the end of 2000. The best perspective I have seen lately on the topic is a recent article by Devin Friedman in GQ that chronicles the writers experience spending time with several start ups. Like the generation before them, today's crop of start ups have unproven business models and still receive valuations that are no where in line with established companies.

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