The virtual land grab of 2013 and similarities to the .com bubble of 2000

The virtual land grab of 2013 and similarities to the .com bubble of 2000
April 29, 2013 Daren Nelson

Is it just me or does it feel like deja vu all over again? We have been doing a lot of work with cloud infrastructure (not announcing anything yet) and I can’t help but feel exactly like I did 13 years ago.

If you remember, the .com bubble was changing everything and the best part was you didn’t have to pay for any of it. Remember NetZero? Or if you did pay it was cheaper than anywhere else and the service would be much better,

So today we hear from some customers that they are looking to move to cloud solutions. They say they want to outsource their entire ‘ticketing ecosystems’.  Fair enough.

I have researched every leading hosting provider, talked to their developer representatives, and run the numbers from here to the next technology bubble. I just don’t see how someone can make money providing high availability servers, high security, high levels of customer support, AND highly functional applications for $49.95 a month. Heck I can’t see it for $100 a month (for the sake of argument I can see it starting at around $150 a month).

Just like in 2000, the venture money is the difference. So many of these companies just cannot be profitable at these prices – I don’t care what economy of scale you compare it to. There are hard costs we all have to pay and being a small highly efficient company, if I can’t make money at $50 a month per user per month, someone 10x my size or 100x my size can’t either. Some of these guys have a marketing budget bigger than my yearly sales.

When you really start to look at them you realize that what we call profit is what they call prophet (I believe that was a famous quote from Jeff Bezos back in the day). You see they are in a virtual land grab just like the .com companies of old. Eventually all these companies will have to turn a profit and I suspect that like and, both of which were really good ideas, they have focused so much on price as their lead that their customers won’t pay more. When you lead on price it never leads to good long-term relationships. It has to be about customer service, product development, and people.

I’m fine if we lose a couple deals here and there. To me it’s all part of the longer term battle, a battle that I have been fighting longer than any other company. Yes we will have a cloud/SaaS offering eventually but when we do, it will be priced fairly and in a way that is win/win for us and the customer.

Remember the quickest way to become a multi-millionaire is to start with a billion dollars and launch a tech startup.

Have a great week,