BUSINESS BLOGS
BUSINESS BLOGS
category: business
19 Mar 2008

I’ve been following funding in online video for some time. Check out a fairly complete list, here.

Yesterday, some were asking: has Web 2.0 investing peaked? Yes. Just ask the VCs themselves.

But I doubt it was ever significant.  Were it not for Facebook’s massive $240M deal last year, investment in the space went down in 2007, with a 3% decrease.

I do not really spend much time covering Web 2.0 funding, because it’s usually small, angel-ish rounds and frankly, I do not see much exits in the space. Admittedly, someone should throw a flag on that statement and say “Ash, what is a Web 2.0 investment?” - generally, this is what I mean:

What we refer to as Web 2.0 projects were never companies, they were applications and features. VCs do not really get excited when there is little requirement of capital AND little exit returns. But, don’t take it from a schlep like me, take it from an actual VC: see Paul Kedrosky in this Wallstrip interview. Mind you, it should be stated that other successful VCs, like Fred Wilson, have made tidy fortunes from Web 2.0 investments. But, I do not really see Feedburner, for example, as a typical Web 2.0 investment because there was some meat on the bone there.

But my point has to do in general with the following. VCs look for meaningful exits, be it IPOs or M&A. But what if one of the leading architects of the biggest Web 2.0 acquisition says the ship has sailed?

What on earth am I referring to, check this out:

Continuing the discussion of the ever-evolving internet, Jon Miller, the former chairman and CEO of AOL, explained that the progress of the internet can be divided into three ages: the early to mid-90s marked an era of communication, the rise of instant messaging. The early part of this decade saw the rise of search while now, with the dominance of social networking sites like MySpace, Facebook and Twitter, is the age of convergent content communication, a blend of the previous eras.

Continues Ross Levinsohn, who was president of Fox Interactive when when News Corp. acquired MySpace, jumped in to talk about virtual worlds and their relevance to the younger generation of internet users, but emphasized the importance of looking beyond, looking for what comes next, instead of jumping on the social media bandwagon now. He stressed that he “would not be investing in another social media site, just as [he] would not invest in a YouTube competitor, just as [he] wouldn’t invest in another portal… it’s idiotic.”

Why this is interesting and why it speaks volumes is because Ross Levinsohn is the executive who got Rupert Murdoch to spend $580M on Intermix, MySpace’s parent.

For the guy who sent the entire Web 2.0 crowd into a frenzy to say the opportunity has passed, you start to understand why VCs realize that Web 2.0 ain’t worth getting excited about, either. But then again, was it ever?