Bubble 2.0 Is a Bubble in Media
There is a bubble in the tech industry, but it has nothing to do with the behavior of venture capital, as so many people are discussing. There's a bubble because the tech industry is trying to be the new media industry, and very few people …
Context & Ripple Effects
This piece drops into a live argument that had been running through the blogosphere all month: whether Web 2.0 constitutes a bubble. Two days earlier, Blogspotting framed the question as bubble versus boom, weighing current startup conditions against the late-nineties pattern.
Scott Karp's contribution is a reframe rather than a rebuttal: the bubble, he argues, has nothing to do with how venture capital is behaving — it sits in the fact that technology companies are positioning themselves as the new media industry, chasing audiences and advertising rather than software economics. That the argument traveled quickly through blogs like Alex Barnett's shows how contested the framing was among practitioners at the time.
First-order effects
- Startups built on audience-and-advertising models are now valued against publishers' economics rather than software margins, which puts their pricing directly in competition with established media companies for the same ad dollars.
Second-order effects
- If the money chasing these companies is anchored to traffic and attention rather than revenue durability, media incumbents face pressure to acquire or imitate blog-style properties defensively, and investors face pressure to distinguish ad-funded plays from durable software businesses.
Third-order effects
- If Karp's diagnosis holds, the structural risk in this cycle is category confusion: capital priced on media-style multiples flowing into technology assets means the correction, when sentiment shifts, would hit tech valuations through media logic — the same dynamic that defined the dot-com unwind.
The trend: The mid-2000s bubble debate is converging on a single question — whether web companies are being valued as technology businesses or as media businesses — and Karp argues it is the latter that carries the froth.