The Best of Times and the Worst of Times

8 Dec ’05

I’ve blogged several times on the curious economics of the eBay-Skype deal, and more recently on the growing disenchantment that the digiterati have with Skype, now that it’s in the process of being corporatized. Overhyped M&A and faddish turns in popularity are nothing new online, but these point to a larger issue that’s a growing problem for web startups. The problem of creating persistent value.

This problem exists because of a confluence of a variety of forces, each of which has been written about exhaustively, here and elsewhere:

    1. The plummeting cost of starting new businesses based on technology
    2. The increasing tendency of users to see the ‘net as a playground, where the old is easily discarded for the novelty of the new
    3. The wide reach of broadband
    4. The gold-rush mentality triggered by highly visible and shiny exits
    5. The impossibility, for most business models, of obtaining any meaningful intellectual property protection, other than copyright, which is easily avoided through duplication of functionality instead of literal copying

So while it’s true that it’s a great time to start a business based on technology, it’s also a terrible time to start a business online. Because if you do start one, as soon as you show the slightest sign of success you’re imitated or leapfrogged by everyone else on the planet, all of whom are now on the ‘net, most of whom are hungrier than you are, any of whom can easily copy what you’re doing, and each of whom has a good shot at creating something that your customers will be quite happy to try out, just for kicks. Oh, and all of this is happening while you’re still unable to charge anything for all the work you’ve done, because somewhere someone is doing something very similar, and giving it away for free.

Oh, and this is going to be the way it’s going to be, for long, long while.

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