Alex Le’s Blog

Slashdot today (Dec 28, 2006) has a link to an article on WSJ about a conversation between 2 venture capitalists. One of them is claiming Web 2.0 is another bubble and the other one claims the otherwise. My take on it: Web 2.0 is NOT another bubble like what happened during the dot-com boom and burst. Why? It’s not general public money that are pumped into the web 2.0 ecosystem like what happened 7 years ago with web 1.0. Base on that fact alone, I can safely back my claim.

To a lot of people who are monitoring and following the news on web2.0, it may seems like a bubble is forming. A classic example: we saw that Youtube got bought with $1.65 bln. How on earth a FREE video sharing site with NO real business plan besides selling ads inventory, e.g. eye-sights, is worth that much? It’s hard to believe. Another speculative number from the WSJ article: Facebook is valued at $500. Sure, whatever. I have to admit that I used facebook once in a while to keep in touch with friends, maybe writing on their walls some b-day notes. The truth is when thefacebook.com’s version for Lake Forest College was available, some of my friends assumed that I had built the site. Because not long before that, I had built www.247lfc.com, an online classified-ads for the college and got some reputations ’round campus — not enough to impress the freshman chicks (I just finished by Sophormore year at the time) but enough to raise a few eyebrows of the faculty and cause dis-comforts to the monopoly on-campus e-follet bookstore. Anyway, to me, fundamentally, facebook is more like a week-end project of a student. Slapping a guesstimate value-tag of anything above a few million dollars is already a hard-to-believe thing, not to mention the ridiculous number of $500 million.

However, these 2 examples above and many not-mentioned cases is not a sign of a forming bubble. They are merely examples of over-valued IT products, which happens to be the expensive merchandise deep-pocket companies like Google, MS, Viacom, etc. want to possess. Women like jewelry and nice accessories. Rich women like expensive handbags and sparkling diamonds. Similarly big companies like to have controversial, widely-known products. If they don’t have anything to brag about, they will buy a product with a premium. But that’s about it about this web 2.0 bubble.

There are a few profound reasons why the wave of Web 2.0 companies is not a bubble.

1. There are not enough big companies out there to cause a massive injection of public cash into the market.
If we look around, we can only name a few really successful companies. It’s true that for every one of those successful companies, there are 10 more of the copy-cats. This is because the nature of Web 2.0 companies: very low barrier to entry. Begin with a javascript framework, slapping on some stripy, shiny, cheerful designs and we have a web 2.0 product or service. However, at the end of the day, the general public generally stays unmoved. People don’t even know about the existence of those companies, not to mention about investing in those companies. I don’t hear anyone mentions alot about IPOs these days, besides the flopped IPO of Vonage last year, and Vonage is not even considered a web 2.0 company.

2. The invested money are by Venture capitalists only, not by general public.
What made the dot-com boom was not the VCs. Yes, VCs commands lots of money, but it was the general public’s interests on the companies at the time that caused the massive injection of cash into the internet. Usually VC’s funding are cost-prohibitive to the general public — I don’t think any VC would accept a small investment of $20,000 from this random old man on the street to so that the guy can participate in the VC’s game. VC’s get funding from rich or uber rich guys because it’s all about the risk/reward ratio: the rich can take more risks so they can play the higher reward game with more money at stakes. The general public are less fortunate, we loose a few thousand dollars in stocks and we will show a disgusting face when someone mentions that company’s name again. The Risk/Reward ratio is of ordinary people are so low that we can’t invest in anything other than ourselves (e.g. paying for college). Since there are not enough IPO’s going around, and people still have the scar of the last burn from the dot-com explosion, the general public are safe from web 2.0 this time. Without the money of the mass, there won’t be any bubble at all.

With that said, where are we heading in the near future? I can see that we will have some consolidations among the copy-cats. Some of the grass will die, or weeded out because the lack of nutritions due to the absence of a real business plan. In stead of seeing 20, or 30 YouTube clones, we will see 2, or at most 3. In stead of seeing 50 Myspace clones, we will hear about 3, or 4, or less.

The overall trend will be the localization of popular services to a per-country basis. Even though MySpace is big in the States, Bebo is leading in Europe, or in South Korea or China, there are major local brands that leave MySpace in the distant trail. Take Ebay: they were just reported to begin waving the white flag, giving up China’s market. So localization is the big trend in the coming year. Successful services or products are ported and modified to work better with the local people. And most of the time, Western companies are very slow in terms of internationalizing or localizing their products and services. Hence, they are likely not able to compete with local companies offering the same or copy-cat products.

Also, I would expect to see more sophisticated Web 2.0 services, instead of the cut-and-paste mashed up services that have mushroomed for the past 2 years. Take the new Yahoo Mail beta as an example: the free webmail serivce behaves more and more like a desktop application with sophisticated features that even a few years ago very few people would imagine. Together with the maturing Javascript frameworks (Dojo, YUI, Google Toolkit, etc.), more soup-ed up applications can be built. A consequence of this fact is building up a web 2.0 application is not a trivial or easy task like what we have seen and experienced: building a working, functional web 2.0 application will require serious planings, engineering of infrastructure, and software design. Such things requires skill and efforts, and they are the results of serious investment in terms of time, money, and human resource. Effectively we will see larger micro-ISV (independent software vendor) putting out applications, instead of a one-man-team or two-man-team like before.

In brief, what currently happens with the Web 2.0 lanscape is low barrier-to entry of AJAX technology leads to the proliferation of new web 2.0 applications. Financial-wise, I don’t see a bubble at all. If there is, then it’s just the beginning, not the end. For me, I’ll hope on the web2.0 wagon and enjoy the ride. It’s too much of a good opportunity to miss out. The thing is, are you ready when the time comes?

For the past few days I’ve been experiencing very high volume of spam comments. It’s about 500 per day, more or less — at least for the last 4 days! I wonder why there is a sudden jump in the volume of spam comments. Askimet told me that it has caught more than 10,000 comments since I started this blog in March 2006. I guess it’s because my blog has some page-rank (it was 4, then 3 untill now after 1and1 suspended my account) so spammers are attracted like moths and the lightsource.

If you wonder, most of the comments are about pornography, buying drugs online, gambling. Suddenly I feel like I’m a P.i.m.p. (remember that 50 cents song?) who constantly needs to purchase cheap drugs while playing pokers with other people. Oh wait, and those spammers they know that I suffer impotency too since they keep offering me cheap cialis or viagra. Humh, thanks but no thanks.

Askimet’s been wonderful. It stopped most spam comments and once in a while do I receive an entry that got through. The entries that Askimet misses are usually too short or the words used are random enough to fool the pattern matching engine. In the future, I may find (or write) an add-on to the commenting system to do some captcha and stop those spammers from eating my lunch.

Oh…sigh… people …people…

So LightReading is a news portal for coprorate computer stuff, like networking, networking security, etc. They sometimes send out invitations for subscribers for extra info, web-minars.

I have come to know about Light Reading a while ago, and I randomly signed up for their newsletter. But I decide this is the day I unsubscribe from their list, so I clicked on the Unsubscribed linke at the footer area of the email.

Here’s is the link that I was taken to..

http://www.lightreading.com/unsubscribe.asp?subscriberid=6xx7xxx ( I masked out my ID # for privacy)

So I unsubscribed myself, but also changed the subscriberID to something else, just to see how the page works … oh uh, I got the “Unusubscribe Page” for someone else who is subscribing to 11 other newsletters from Light Reading. Phew. Too little work and I already discover a vulnerability.

I know portals like Light Reading can sell their services because they collect a huge database of emails of supposingly “C?O”, “Networking Engineers”, etc., so the commercial contents and products can be sold directly to these important corporate figures. Well, not if one day, LR find out that their newsletter has no reader because someone has conveniently (or mischievously) unsubscribed everyone else using the previous link. Of course noone will do that manually, but s/he can write some script that loop through any possible IDs (may take a while, I know, mine is in the upper 6 millions, LR has a pretty big colection of users), then request the page, and make a POST submit to the form. Or just make a page that continuously submitting POST requests to unsubscribe everyone (PHP CURL would make this an easy task). This method is faster, since I doubt that LR do any double checking for “unsubscribe request”. I mean something in the light reading of …

POST to unsubscribe.asp with subscriberID = #####

Humh … If I were Light Reading, I would seriously rewrite the unsubscribe mechanism.

(Disclaimer: I did accidentally unsubscribe someone else other than myself from the list while experiment with the site, so oops, sorry, don’t sue me. I did point out where you guys did wrong, so go fix it and thanks me later)

I was reading the VentureBeat’s post on Amazon on its vision and was taken to the original BusinessWeek.com article. I have to say that I have great admirations for Amazon and its amazing technology to support the $10 billion dollars annual revenue. However, reading the article, it seems to me that even the interviewer did not quite appreciate the R&D efforts of Amazon. His questions were based on a simple perspective: why are you [amazon] doing all of this stuff just to let your profit halved this year? The interviewer, the public analysts, and the investors do not understand the complexity nowadays of e-commerce, especially at the scale of Amazon.

Amazon is a technological company, just like Google. Without its infrastructure, Amazon would not work. Period. The company has been around for a while, hence the brand is strong enough to have people’s trust. What Amazon has to do is everything it can to keep up its reputation. And it is doing an AMAZING job at that. I am a proud Amazon’s PRIME subscriber because I trust in amazon, its delivery speed, and its wide selection of books and other items. Amazon’s recommendation system is really good because I have bought quite a few books that I saw in the recommendation section. All of this is happening because the supporting technology.

I am a web designer/ coder. I know how hard it is just to simply build a Content Management System, and it’s even harder to design the CMS application to scale up when it gets more traffics. I bet most financial analysts don’t know or even hear about things like “load balancing”, “caching”, “query-optimization”, or even “fail-over”. Let’s take Slashdot.org. Slashdot.org is 100 times less complicated than Amazon, yet if you ask any sysadmin of the site about how they run it, you will have quite a story. To actually see how hard it is to run a large-scale website, try this link and read for yourself. http://ask.slashdot.org/article.pl?sid=05/12/18/178231. Now imagine how hard it is to run Amazon.com. I bet $100 very few financial analysts would understand that. It’s like the two economics classes you’ve taken in college: micro and macro. Building a website is micro, but building it up to the scale of amazon, it’s like all macroeconomics now. You need Ph.Ds and engineers for that stuff.

It seems to me that people don’t get the big picture of what Amazon is trying to do. Amazon is building the infrastructure of future e-commerce. That’s what’s they are doing. Just like eBay a few years ago. eBay got big not because it sold stuff. eBay got big because people used the platform provided by eBay to sell their stuff. eBay created a sub-economy, an entirely new marketplace for online auctions. And similar to Amazon, we cannot separate eBay out of its technology. If you haven’t yet seen the big picture, here’s mine:

Imagine mom & pop shops now can offer their goods through amazon and through amazon’s network. Amazon has already had that capability, but what we see right not is still a tip of the iceberg. Through its highly distributed computing network, amazon can offer that very mom & pop online shop the same capabilities of high-end, expensively built, dedicated shops. Amazon is building up the very infrastructure for future e-commerce. And I am glad that they decided to share their success with other people, and first of all, to the developers community.

The game is still of an early stage and since Amazon want to be misunderstood, “No, we’re very comfortable being misunderstood.” — quoted from the BusinessWeek article, a lot of people, especially the financial analysts and general investors don’t see what actually is going behind those reported numbers of dividends, annual revenues and profit. Most people can see the chart of Amazon’s stock value. The stock’s price is declining, true, but it does not mean that Amazon is in trouble. If I were Borders or Barnes and Noble, I would be very worry because soon, Amazon will be the dominate player on online retails business and both Borders’ and BN’s marketshare for books will shrink like Yahoo’s search vs Google’s search (FYI, 60% of the traffic to my blog is from Google. I see very few searches from Yahoo) And until the general public see the final outcome, Amazon’s stock will then be up 200%, 300%. If I have money now, I would seriously try to get into Amazon’s stock now. What a bargain. I don’t know why people are complaining it.

Every dollars that Amazon are spending on R&D will probably give them back 2, or 3 times the original value in a few years. The internet now has over 100 million sites (netcraft novemver 2006), and probably a lot more users than that when we on this earth get our own broadband connections. And again, to support e-commerce activities for such a large population of net uers, we need serious R&D money. I guess my message to the public investors is: it’s okay for Amazon to “waste” money on R&D, they know what they are doing. So keep your stocks. Don’t short AMZN yet. I’d like to take Toyota as an example on how important R&D is. Toyota was the one company that started to do R&D for hybrid cars while Ford, GM, and other automakers were busy churning out SUVs. Guess what, now Toyota is busy licensing its technology to Ford and GM to make hybrid Escapes. Both Ford and GM’s cars wouldn’t sell when oil price shot up. GM, the American’s pride, was going through serious troubles and had to lay off so many employees. The moral of the story is: R&D money is good and wise money. It’s okay if the company seems to spend a little more than it “should”. In this cut-throat global economy, if you don’t stay innovated, you’ll loose.

Another question that Jeff Bezos was asked is

aren’t you enabling many more potential competitors by giving them these services to get a company up and running much faster?

Even though Jeff did not answer the question frankly, what Bezos’s strategy for Amazon is to provide the infrastructure for future e-commerce and e-retails. The more people rely on Amazon’s services, the better. Amazon can just maintain, expand the system, while other people, those mom & pop shop owners are paying Amazon a cut on every transactions, just like ebay. Remember, Amazon is building the new web economy and they are collecting tax already.

Moreover, Amazon has attained what people would call “critical mass”. Can you imagine a company with a solid $10 billion dollars annual revenue going out of business within a year or two? Amazon is way too smart and too technologically ahead of the rest for that to happen. It’s still the leading online retails company online, and it will still remain so. I can safely back that statement because Bezos mentioned about Amazon’s Prime adoption rate, which he said had been extremely well. People trust Amazon.com. It’s the brand, it’s the image, it’s the vast selection, it’s the low pricing, it’s the recommendation technology, it’s the prompt shipment, it’s the excellent return policy. It’s Amazon. What can you ask more out of Amazon’s current retail business? I don’t see any one can seriously compete with Amazon on online-retails business.

I found it quite amusing that Jeff Bezos maintains his “wish-list” for his family and kids. What exactly he’s wishing to have? I bet he has an “uber-prime” subscription to get the stuff from amazon in like 30 seconds. And that’s what I’d define being successful in life: running a successful company and still be able to spend time and enjoy life with your family. Life is not full without family and love.

Finally, Jeff Bezos is smart, don’t underestimate him.

For the past couple of years, I have allowed people to post on this page regarding Primerica because I was interested in hearing people’s comments on that subject. I appreciate all the posts made here, and from those comments, it is clear that Primerica is a legitimate company, and that the opportunity it provides is suitable for some people and not for others. Because the discussion has gone on for some time now and I am moving on to other projects, I have decided to close this page to further comments.