Valleywag predicts the death of Web 2.0

In a post on Friday, Valleywag not only placed TechCrunch in the deathpool, but tossed in the very idea of a Web 2.0 company in the process. According to the tech gossip site:

"When the smoke clears after the crash and burn of the money machine behind today's tech startups, there's one word no one will ever write into a business plan again: Web 2.0."

I find this interesting because there are quite a few reasons to believe they're right, even while dismissing the obvious blanket statement as summarily wrong.

Sure, many Web 2.0 companies are born out of venture capitalists riding along on the latest trend: location-aware services, highly specific social networking brands, picture-editing sites. When those firms run out of cash in the current bleak economy, then the Web 2.0 start-ups will struggle.

Secondly, there is a trend here. Mahalo is cutting staff, Zillow and Seesmic are apparently in trouble, Yahoo is...Yahoo. Heck, even the idea of a blog is in trouble, according to Wired. I've met with several Web 2.0 companies who tell me the same thing: ideas germinate at small companies, and the only way to get those ideas to grow is with funding. You need employees, snack rooms, health benefits, and fast broadband access. All of that stuff requires cash, and it has to come from somewhere.

However, I think what Valleywag is missing is that many Web 2.0 sites are privately funded -- by the people who own the company. The entire tech industry is not funded by venture capital firms. Apple has $25B in the bank, and we all know Microsoft has hordes of cash. These companies can buy up Web 2.0 companies in a poor economy.

The other factor is that, if this is a tech bubble that could burst, I think Web 2.0 sites are more resilient this time. We're a long way from the first dotcom bubble where companies would set themselves up as e-tailers without actually having a warehouse, or spending frivolously on exotic employee getaways. Many Web 2.0 companies are stripped to the core, running as lean as possible, with sound business models that are built on registered customers and not fly-by page views.

One thing about a poor economy: if you offer a free service like FaceBook or MySpace, your traffic can actually increase because people turn to entertainment and free services on the Web. Granted, I would hate to be Amazon right now, heading into Christmas. But, free is still free.

I'm not going to make any predictions either, but the fact is: there is a lot more sustainability for the current crop of Web companies, and I think they can weather this storm.