The running joke in SF is trying to peg the next bubble. Last year we called the current rising consumer phase "frothy" to differentiate it from the late 90's/early 2000 phase "bubble". But the signs appearing now seem to call out "Bubble 2.0". So what are those signs we all recognize from last time?
1. Every candidate has multiple offers, some from seemingly insane companies - during the last bubble, I lost an employee to "BBQ.com - the portal for outdoor cooking", which lasted a total of 9 months after that period. We're seeing early signs of this - e.g a friend's company recently lost an account manager who doubled their compensation as a VP at a new start up, and we now hear people say "I have an offer from XYZ You Tubes-like site, or XYZ Xanga-like 2.0 site - it's going to be huge!" What's going to be huge this year are the search firm fees.
2. New acronymns entering vocabulary - after CES I needed to look up the term "UGC", which apparently became mainstream in the 6 weeks between Thanksgiving and CES - yes, that would be User Generated Content. And the Facebook or MySpace vocab changes so quickly I can't keep up
3. Internet Companies Sponsoring TV Shows - tonight I watched Match.com sponsor a new show called "Love Monkey" from the former Bowling-Lawyer guy "Ed", who's now an A&R exec struggling to find love. Now Match.com is no where near as hilarious as a sock puppet showing Super Bowl ads, but I think we're well on our way. Given that Fox decided to show MySpace ads during Arrrested Development a few weeks ago (because 50M viral users really needed to see an amazingly fun, but niche show watched by a few million viewers), I'd say we'll see more of this nuttiness. But the real sign will occur when no one even recognizes the company which is in the commercial - we're not quite there yet.
4. Companies going public at ludicrous valuations with almost no revenue - See Digital Music Group posts - 'nuff said...
5. The Term "Feature Flip" becomes common nomenclature - when you meet with a new company, they will often say that they don't think that it's a standalone company, but that they don't need a revenue model since "someone will buy it", aka "Feature Flip". Every music recommendation or new indie aggregation site is like this - Sounds like 2001...
6. Enterprise VC's and Non Standard VC's funding Consumer Companies - I now receive the most bizarre calls from VC's (names have been concealed to protect the guilty) who have formerly funded only micro chip firms and enterprise software ideas, but have now decided that they must invest in casual games or User Generated video firms. On the other hand, a good friend at a private equity firm just admitted that his firm is now investing in VC-stage companies in the search for higher returns - yet another sign of the last bubble.
7. Better Parties - the stakes are going up again. The party after the Web 2.0 conference was just rocking, outside of the 90% male ratio and total geek focus (no one should scream and beg for Flock T-shirts, a company soon to be featured on VH-1's "Where Are They Now?"). That having been said, the Xmas parties from the VCs went up a notch this year, and I've seen marketing budgets for all events, including companies I've never heard of, start getting more fun for all involved - Huey Lewis should be excited since his gigs should increase.
8. Commercial real estate in SF going Up - I can't speak for other cities, but higher-end real estate is finally firming up in SF, with the other lower end leases seeing at least a little bit of interest. You used to be able to dicate terms to landlords, but we saw them firming up on terms as we finalized our new deal in downtown SF. We're still 50% below the peak rent during the last bubble, so this more of a recovery than a bubble, but everyone I know is looking for more space.
Is there a Bubble 2.0 emerging? Yes, the bubble is emerging since mainstream companies finally figured out that most of their consumers are now on line vs off line - I mean who actually listens to late night radio shows like I did as a teenager? In addition, the opportunities are now emerging since investment capital is now widely available for great consumer ideas, although many will admittedly fail as the key consumer sectors consolidate. e.g do we really think P&G and Kraft want to advertise in front of the hypothetical Worlds Dumbest Internet Videos? It will shake out by later 2007 when quality finds its value.
Selfishly, it's great from my point of view since it's especially SF city-oriented vs other former chip or enterprise-oriented trends which tended to favor Silicon Valley. It's clearly going to end badly for a lot of firms when the bubble collapses, but it's going to be a great year for those who succeed since a lot of consumers are waiting for new opportunities. Just like last time...