We wrote last week about some of Silicon Valley’s savviest investors warning of a coming shakeout among Web 2.0 companies. This slideshow from Sequoia Capital, which is doing the rounds in the tech blogosphere today, sums up the bear case: Plunging house prices, debt-laden consumers and a banking crisis that threatens to make an already slowing economy worse – these are the things sharp downturns are made of, and Web 2.0 will not be immune. Sequoia points to data showing year on year declines in online advertising and web retail spending – the basis of many Web 2.0 companies’ revenue streams (those that have them, at least).
The bottom line? It’s time to get cracking on those business models. In a bull market, it’s fine to talk about eyeballs. In a bear market like this one, the companies that survive will be those that can demonstrate an ability to turn those eyeballs into cash, and then use that cash wisely to ride out the storm.
