Separately, data shows that venture investments in Web 2.0 companies last year increased strongly, but that valuations actually dropped.
Peter Rip, of Crosslink Capital, who has invested in several Internet companies considered Web 2.0-focused, including Riya, Vast and Teqlo, posits that one way to check the “energy dissipation” around Web 2.0 is to look at Web 2.0-centric media, including Techcrunch, Gigaom, and Technorati.
All three of these properties show a similar falloff in reach from their Q4 peaks, all notably right around the Web 2.0 Conference, he notes, pointing to graphs from traffic-measuring service Alexa.
Peter’s post is here. He suggests the early easy wins by new companies targeting Web 2.0 have been had. Now that Web 2.0 has gone mainstream, the hard work begins.
The real debate takes place in comments on Peter post, which he has already shut down.
Of course, Alexa data is notoriously unreliable.
Update: Another controversy is how Web 2.0 is defined. One good definition has been produced by VentureOne and Ernst & Young (we wrote about their definition here).
Today, the two released their latest report, which shows venture capitalists more than doubled their investments in this area last year (see table below), but that the valuation they placed on these companies actually dropped. On its face, this suggests a cooling in the hype around the sector. However, the value drop may stem from other factors. For example, investors may be having to find and invest in Web 2.0 companies earlier in their cycle, because the companies need fewer overall dollars to grow– and so bypass taking capital later on. That means the value of the companies is lower at the time of the investment, but doesn’t necessarily mean a cooling off of interest. Indeed, many investors we’ve talked with say valuations are higher than ever, once you factor in how early these companies are in their traction.
VentureOne and Ernst & Young have released a very useful table of Web 2.0 investments and their details here (download Excel file)
And here is a ranking of the most active venture capital investors in this latest cycle (more detailed info here; downloads Excel file)