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John Dvorak of PC Magazine: The New FOX Technology News Anchor

Posted On: August 2nd, 2007 | Published Under: Web Development

There will not be a repeat of the previous dot-com bubble burst any time in the next few years, no matter what internet pundits like John Dvorak have to say.

Articles like John’s are written for those who know the internet only as “that thing where I check my email”. Personally, I rely on PC Magazine for my cutting edge internet news as much as I rely on Good Housekeeping for my cutting edge internet news. His “brave” attempt to go against the mainstream and warn us poor common folk of our pending doom has so many flaws and baseless claims, that John’s motives are obvious.

First off, I would like to clearly state I agree with his description of the dot-com bubble burst and the reasons behind it. E-commerce delusions and fear of the destruction of the brick-and-mortar commerce fueled insane valuations of companies. Real revenue never came, people panicked, stock was sold by the billions and the bubble collapsed. However John, spending half of your article explaining this in a way so that it paints you as the all knowing oracle to suck us into the beginning of your flaccid argument is pathetic.

Profound statements like, “And since this moment in time is only the beginning of the cycle, the best nuttiness has yet to emerge.” and “current bubble, already called Bubble 2.0 to mock the Web 2.0 moniker, is harder to pin down insofar as a primary destructive theme is concerned.” show me one thing: You have no clue what is going to happen, so why are you grabbing the red phone and screaming for total panic?

You claim that social networking and video social networking will be the end of the current internet as we know it. Youtube, Facebook and MySpace are plummeting the internet into the next dark age according to your article. The cold dark internet void of social interaction online has finally been filled by social networking sites and the hundreds of millions of people who use them worldwide. Your reaction to this, “This scene is totally out of control and will contribute to the collapse for sure.”.

I’m sorry, I don’t think I understand your evidence here. 100 million + people use social networks each month and you claim these companies should not be invested in and should not be purchased as premium prices? So I guess I should sell off my alternative fuel stocks and my other stocks in emerging markets that I own. Why would anyone ever place value in companies paving the future, when there is money to be made posting outrageous editorials about the looming doomsday?

Beyond that I’m not even going to address the next five points you used as evidence. Each one is more baseless then the previous and they only show one clear piece of evidence; you have no clue what you are talking about.

So here is the evidence to back up my statements.

1. We have switched from an IPO frenzy and VC funding free for all to a very prude and stable investing landscape. Being involved directly in the VC market I can tell you from an insiders perspective several things that have changed dramatically from the VC funding of 1999-2000. VC funding is now 90% how much real revenue can be recognized and 10% how much potential does this idea have to be revolutionary. Back in 2000 it was the exact opposite. All you had to do was say, “I have a super kick ass idea that will change the world forever, and maybe I can make it profitable somehow!” and you would get $5,000,000 on the spot. Now days, unless you have existing revenue or tremendous traffic levels, a rock solid staff, an even more rock solid idea, and are willing to give away 60-80% of your company to the VC, good luck getting a foot in the door.

2. There are exceptions to this, and these seem to be the only ones you are focusing on. Congratulations John, you can read that Youtube was purchased for 1.775 billion. Of course what you apparently fail to realize is that this transaction along with so many other big ones similar to it, were purchases. There is a light year’s worth of space between investing tens of millions into a pet food online store IPO and a company purchasing a startup to fill a need. So many of the big buy outs, if not the strong majority of them, are based on a company’s trying to find a startup that is building a product that fits in there product/service line perfectly.

When you have a gap in your product line and you find a small company that has already built the product you are looking for, guess what, you will probably pay a premium price to get what you want. Rupert Murdoch needed a dedicated financial news resource to launch his upcoming TV channel, so he pays $30 per share over market to buy the Dow Jones. It will cost him billions, but it fills a need quickly and sufficiently.

It boils down to one simple fact. The internet moves fast, companies need to fill product/service line gaps quickly, and they are not willing to wait 2 years to develop a filler. So they shop the market, find the ideal solution, and pay a premium higher then market value price for the startup. Problem solved.

3. The internet is one of the keys to future innovation. Of course this sounds cliche and to be honest, it is. However, the evidence is there that the communication, connectivity, and the global market place have changed since the internet’s debut. Sure, it wasn’t drastic like everyone initially thought, but the changes are evident in our daily lives. I don’t go to book stores anymore, I haven’t bought a CD in 5 years, I don’t read a paper newspaper anymore, and I communicate faster and manage contacts better all due directly to the internet. It has change my life and the way I do business, so investing in its future products and services seems like a fantastic idea to me.

You seem to be against investment, against high valuations, and against people having an optimistic outlook about the future of the internet. To me, it’s ludicrous to back off the internet to prepare for this mythical collapse you predict.

The internet economy is not going to collapse again. However, you will see a large dip in online revenues coming up. John is trying to pass off the pending housing sector collapse and its eventual effect on the retail sector as the future collapse of the bubble. He wants you to believe that because of the upcoming 10-15% correction in the US economy and stock market due to the housing bubble bursting, that the drop in online revenues will be completely separate from this and due to a bursting web 2.0 bubble instead.

The truth is, yes there will be reduction in revenues online as advertising slips due to lowered consumer spending. However, to attempt to terrify the internet community with prophecies of a grand collapse and cross your fingers that they won’t realize it will be the US economy as a whole instead is deplorable.

So watch for John to yell and dance on every mountain top, like a 10 yr old girl at her first cheerleading camp, that the internet economy slumped and the bubble burst and he was the Nostradamus who said it was coming.

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One Response to “John Dvorak of PC Magazine: The New FOX Technology News Anchor”

  1. Vic Says:

    I agree with your article. Usually that guy has no idea what he is talking about. His article was created to grab attention. Thats it. All of his reasons are baseless like you said.

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