Paul Graham on the Web 2.0 bubble

Paul Graham is a smart guy with loads of experience — not just in Web technology, which he knows from the programming side, but in business as well, which he knows from the venture capital side — and so it’s worth paying attention to what he has to say about Web 2.0. He was interviewed by British journalist Ian Delaney, who is writing a book on Web 2.0, and agreed on the condition that he could post the interview to his site, which he did. Here are some excerpts:

“If you create a web-based startup that becomes massively popular, you can probably figure out a way to make money from it. Just about every massively popular site has. The idea of building something popular then figuring out how to make money from it was born in the Bubble. It sounds irresponsible, but it works. Requiring founders to have a carefully worked out plan for making money is not hard-headed business sense. It’s what hackers call “premature optimization.” The really important thing is to make something people want.”

So does Graham think that Web 2.0 is a bubble?

“No, I don’t think this is a bubble. The companies the VCs are investing in now are nowhere near as laughable as the ones they were funding in 1999. A lot of those seemed like deliberate parodies. Certainly there is a lot of hype. For example, there are a lot of sites using cheesy “Web 2.0” design elements to seem cool. All those fades and “Betas” and giant fonts are going to look very dated in a few years. But cheesy design doesn’t make a bubble. The measure of a bubble is investment, and that’s still under control.”

And what about the term Web 2.0 — is it all just hype with a cheesy name, or is it a real thing?

“Web 2.0” is a weird phrase. It began as the name of a conference, but the people organizing the conference didn’t really know what they meant by it. Mostly they thought it sounded catchy. However, “Web 2.0” has since taken on a meaning. There are some interesting new trends on the Web, and it’s the nature of a phrase like that to adhere to them. It’s kind of like they printed the name on a sticky label, threw it on the floor, and it stuck on the heel of a guy passing by. The name is a little fake, but the guy is real.

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