Frank Catalano

Now it’s clear to me the Web business boom of the past few years is completely different than the earlier, much maligned dot-com boom. Except where it’s exactly the same.

I have this gift of perspective because in October, four years ago, I disappeared. I gave up more than a decade of analyzing, commenting on, and consulting in the tech industry to take an executive-level position in a global publishing company that needed both technology understanding and marketing expertise for its U.S. education businesses.

On the road every week, I could no longer attend local tech events or snarkily snipe for Seattle Weekly, the Puget Sound Business Journal, Q13, the local NPR stations or my blog – much to the relief of many. That changed when I recently left my corporate gig.

Rip Van Winkle-like, I discovered the WSA (which apparently had lost so much of its identity that its initials at last literally meant nothing) had been revitalized as the Washington Technology Industry Association. But its membership was full of companies I didn’t recognize.

I followed the kind advice of WTIA CEO Ken Myer and, like the seventh grader who nervously crossed the junior high school gym floor to a wall lined with the opposite sex, decided to attend the dance that was a WTIA networking event. And then, a few weeks later, a dinner.

On the surface, it was invigorating, inspiring. Founders swore that their new companies had figured out markets and approaches that were completely different than what had gone before.

Yet what I saw made real the rumors that had made it to my corporate cocoon, a reality reinforced by the events of recent weeks. Turns out the differences for Internet companies from last decade’s boom mostly are not, and some companies not already in the toilet may be lapping at the water:

-- Instead of aggregating eyeballs in the earlier rush to “get big fast,” many of the new crop are focused on aggregating user-developed content (a business model BusinessWeek famously described as “free labor”) to get to community fast. And then what? Adding exponentially more manure to the pile does not suddenly transform it into a poppy field. Even the CEO of what is arguably the poster child for this strategy, Mark Zuckerberg of Facebook, recently admitted to a German newspaper he still hadn’t identified a viable long-term business model for his company – and won’t for three years.

-- A lot of business plans from the past couple of years might be summed up as get big enough, or be seen as cool enough, to be bought – rather than having as the primary goal to build a sustainable job- and profit-creating business. In the dot-com era, the equivalent was the build-to-IPO-and-cash-out-fast strategy. This is the Greater Fool Theory, so successful recently in mortgage-backed securities, applied to Web 2.0.

-- Too many of this era’s newbie founders shared an unspoken, underlying assumption that low barriers to their entry rose up to bar everyone else who came after them. While it’s true first-mover advantage has proven not to be (just ask VisiCalc, the Apple Lisa, Yahoo! directory search and others later trumped by better marketing and/or more receptive markets), being second or third and having done the hard work to fix pioneer kinks is not the same as being me-too. There are simply too many wannabes in the current Web ecosystem.

Certainly, even with the recent downturn, some will succeed. There are a number of promising businesses in the resurgent WTIA and elsewhere.

And perhaps I’m jaded, having spent four years in a world where people are willing to pay money for products and services that have value to them.

But as today’s tech entrepreneurs race down what they once thought was a path to success, it wouldn’t hurt for them to look carefully at an obscured forest floor for the hidden traps that were laid a decade ago.

Frank Catalano (http://intrinsicstrategy.com/) is an author and long-term, hands-on advisor on marketing and business strategy for technology and education companies. Guest posts are the opinions of their authors, and don't necessarily represent the viewpoint of TechFlash or its staff.