Web 2.0 - so where's all the hype this time?
By stephendavis on Sep 21, 2006
Around a year before the dot com bubble burst while I was working in the US, I remember seeing a double page spread advertisement in the Wall Street Journal (rate card cost $100,000+) for an Internet start-up retailer. The online retailer claimed that its low cost base enabled it to pass on substantial cost savings to customers on a range of everyday consumer electronic products. Furthermore, it was able to aggregate demand across other online retailers in order to buy at a high discount levels from manufacturers.
Curious, I checked out what was on available to buy at the company's web site. Incredibly, the web site had less than a dozen items listed - a smaller range than most street vendors and certainly less than a corner shop.
Firstly, was it not pre-mature for this company to be spending its investors’ funds on advertising before it had a competitive offer? And secondly, why choose to advertise in the financial press, in a publication that commands a high CPM (cost per thousand impressions) when USA Today for example, would have offered far more value for money - and most likely more retail sales?
Of course, we now know the answer. The firm was probably not interested in making any sales from the advertisement at all but instead seeking to prepare itself for an IPO, an initial public offering on Wall Street.
Despite the fact that Web 2.0 has already created a handful of successful businesses, the company's involved are by comparison understated in their self-promotion. This is partly due to a low investor appetite for pure-play technology IPOs. In most cases, where start-ups have been sold, it has been to an established company, e.g. myspace to News Corp., friendreunited to ITV.
At the same time, the Internet itself has developed into a far more effective communications vehicle for companies to get themselves known - and consequently they have become less reliant on traditional media advertising to grow their businesses (and get themselves noticed by the investment community).