Bill Gates says we’re back in a bubble — kind of

Hmmm, Bill Gates is reported to have said “we’re back kind of in Internet-bubble era in terms of people thinking: ‘OK, traffic. We want traffic. We want traffic. There are still some areas where it is unclear what’s going to come out of that.”

Yup. The bubble is back Bill says.

A few differences I’ve noticed this time around (so far):

1) I haven’t seen a really stupid business model yet. No selling dog food that would never make enough money to pay for the trucks it was being delivered on. Yeah, there’s too many Web 2 businesses with too much reliance on advertising, but most of these businesses are funded for very little money so the pain to investors for the death of these things is going to be very small (and, I predict most of them will make enough to pay salaries and give back something to their investors, so we won’t see a huge number of bankruptcies like the last time).

2) No retail investors. Joe Kraus pointed this out to me. There haven’t been any IPOs. No “mom and dads” buying stock like the last time around.

3) Irrational exuberance isn’t there. Yeah, we all get together at Arrington’s house or a VC’s office and drink a lot of beer and wine. But, really, those parties are small potatoes affairs compared with some of the shindigs in expensive locations last time around. Most Web 2 companies aren’t spending more than a few thousand in marketing and if they do, it’s to hire someone to build a Google keyword buying and SEO strategy.

4) Wealth is transfering not from retail investors, but from big companies who are battling with each other, to both inventors/entrepreneurs and wholesale investors (VCs).

One thing I’ve noticed is that Bill is taking a very conservative approach to Web companies. He even pointed this out to me and Mike Arrington at the Mix06 conference earlier this year.

It’ll be interesting to see if Bill has the last laugh in this game. I usually don’t bet against him, but I am this time around. Why? Cause I think Microsoft will end up spending more to clone some of this stuff than its competitors paid. Yes, even YouTube. Tell me, how will Microsoft create a video service that gets talked about almost nightly on mainstream media?

It’ll have to spend a lot of money buying cool and exclusive content for its Soapbox service. Funny thing. I couldn’t even remember the URL for it and I’m an insider in this industry. How did I find it? Google. Told me the URL is http://soapbox.msn.com/. So, they haven’t even gotten a cool URL yet. Yeah, that won’t cost $1.6 billion. But I keep hearing about YouTube. YouTube this. YouTube that. Everytime I hear about YouTube doing something they extend their lead on Microsoft.

Hey, Bill. You want to be in the advertising business, right?

Go to your advertisers and tell them “it’s not about traffic” and see what they’ll say.

68 thoughts on “Bill Gates says we’re back in a bubble — kind of

  1. Tom: in theory, yeah, two sites can share an audience, but in reality that just isn’t what happens. Most people have heard about “YouTube” now, so if they wanna go find some video they’ll go there.

    How many have heard of Microsoft Sandbox or, even, Google Video? Not many. That’s one reason Google bought YouTube, even though they have Google Video already done and out there.

    Getting audiences is tough. Microsoft has some built in advantages, though. They already have huge audiences that they can bring over via links and other integrations. But even doing that has a cost. Do it too well and you’ll get hit with a DOJ lawsuit, which will cost billions.

  2. Tom: in theory, yeah, two sites can share an audience, but in reality that just isn’t what happens. Most people have heard about “YouTube” now, so if they wanna go find some video they’ll go there.

    How many have heard of Microsoft Sandbox or, even, Google Video? Not many. That’s one reason Google bought YouTube, even though they have Google Video already done and out there.

    Getting audiences is tough. Microsoft has some built in advantages, though. They already have huge audiences that they can bring over via links and other integrations. But even doing that has a cost. Do it too well and you’ll get hit with a DOJ lawsuit, which will cost billions.

  3. “Past experience has taught me that Microsoft isn’t very adept at getting existing audiences to move.”

    – Robert, I agree with your argument partially, but there is one assumption that you are making here that Microsoft’s Soapbox service would have to turn people away from youtube to be successful. Personally, I believe that two video sites can become extremely popular and that both of them can share the same audience.

    This is not something like, are you a linux user or windows user? This is not even like are you a google/windows live search user? The audience do not have to ditch Youtube for Soapbox. Personally, I would like to upload my videos onto several video sites for more visibility and also use more video sites to find a wide variety of content.

    I think people would welcome more and more content sites and they do not need to have mutually exclusive audience…

    What do you think ?

  4. “Past experience has taught me that Microsoft isn’t very adept at getting existing audiences to move.”

    – Robert, I agree with your argument partially, but there is one assumption that you are making here that Microsoft’s Soapbox service would have to turn people away from youtube to be successful. Personally, I believe that two video sites can become extremely popular and that both of them can share the same audience.

    This is not something like, are you a linux user or windows user? This is not even like are you a google/windows live search user? The audience do not have to ditch Youtube for Soapbox. Personally, I would like to upload my videos onto several video sites for more visibility and also use more video sites to find a wide variety of content.

    I think people would welcome more and more content sites and they do not need to have mutually exclusive audience…

    What do you think ?

  5. I’m so glad that Microsoft finally wised up and stopped letting you write this drivel while you were on their payroll… sad to see someone whose only talent is building up their own ego by putting other people down.

  6. I’m so glad that Microsoft finally wised up and stopped letting you write this drivel while you were on their payroll… sad to see someone whose only talent is building up their own ego by putting other people down.

  7. “Past experience has taught me that Microsoft isn’t very adept at getting existing audiences to move.”

    You might want to compare the instant messaging market of 2000 vs 2006 and see who is the dominant IM player then vs now.

  8. “Past experience has taught me that Microsoft isn’t very adept at getting existing audiences to move.”

    You might want to compare the instant messaging market of 2000 vs 2006 and see who is the dominant IM player then vs now.

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  10. It is a bubble, it’s just a well contained one. The Silicon Valley has gotten to the point both from a topical and economic standpoint, it could easily separate from the globe and form a small satellite nation in geosynchronous orbit with the earth; complete with it’s own recycled atomosphere and government.

    I agree with you wholeheartedly that it’s not a bubble like the dot-com bubble at all. But from a hype point of view it is indeed a bubble since it is fueling a rapid wave of Web 2.0 blogosphere echoes in an almost incestuous manner. Even the normally staid vanguard printed press is feeling the need to quip gleefully on the likes of YouTube or be the first to coin a new term like “Web 3.0″.

    But this time he blast zone is contained to the capital and court of the wagging valley that is ravnenously seeking the next trend to blog about, or to invest in. The rest of the PC world however is responding with a look akin to that of a German shepherd, cocking it’s head in curiousity at it’s nuevo riche owner, who is desperately trying out the latest Dog Whispering technique on it.

    Personally, I find it all to be a lot of fun and since no one is really getting hurt financially as you point out, why not?

  11. It is a bubble, it’s just a well contained one. The Silicon Valley has gotten to the point both from a topical and economic standpoint, it could easily separate from the globe and form a small satellite nation in geosynchronous orbit with the earth; complete with it’s own recycled atomosphere and government.

    I agree with you wholeheartedly that it’s not a bubble like the dot-com bubble at all. But from a hype point of view it is indeed a bubble since it is fueling a rapid wave of Web 2.0 blogosphere echoes in an almost incestuous manner. Even the normally staid vanguard printed press is feeling the need to quip gleefully on the likes of YouTube or be the first to coin a new term like “Web 3.0″.

    But this time he blast zone is contained to the capital and court of the wagging valley that is ravnenously seeking the next trend to blog about, or to invest in. The rest of the PC world however is responding with a look akin to that of a German shepherd, cocking it’s head in curiousity at it’s nuevo riche owner, who is desperately trying out the latest Dog Whispering technique on it.

    Personally, I find it all to be a lot of fun and since no one is really getting hurt financially as you point out, why not?

  12. Hi Robert,

    Per usual, extremely interesting stuff going on in your blog!

    I, too, had a long, hard look at that IHT article where Bill says: ‘OK, traffic. We want traffic. We want traffic.”…but from a different angle: I don’t think Bill would be saying that if he knew what a cock-up has happened on his Windows Live Messenger global platform recently…Hit 100% capacity and had to do an emergency upgrade on Oct 17; Deployment wasn’t confident that they could do it, so it was postponed until just last weekend!

    I like your comment “Past experience has taught me that Microsoft isn’t very adept at getting existing audiences to move” – - and, I’d like to add that Microsoft themselves don’t move as an agile, visionary company anymore. They are no longer a leader; They are a follower / copier with deep pockets. And a chairman who should NOT be the Chief SW Architect of the company! The examples are endless: Vista – 5 years too late; MSN Messenger converted to Windows Live Messenger (and a dead-ringer for Yahoo Messenger’s look and feel…but, still missing some great, key functionality); Zune tries to be an i-pod; and, don’t get me started on their outdated, insular view that “everyone knows SQL Server scales better than Oracle” – this comment from an MSN Project Manager in the UK who’s trying to clean up the Mobile platform mess!

    I could go on and on…there’s another very interesting article recently about Bill Gates’ 3 keys to success which leads me to my closing comment, similar to Jack Stack’s: “How about developing products that truly help companies?” I’ll try to find the link back to that article and post it here or e-mail you with it; Bottom Line is, do you think that one of the 3 Key Success Factors was “Listen to your customer”? ….very rhetorical question.

    Keep up the good work, Robert.

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