A panel of Silicon Valley investors seeking the next investment wave seizes on companies helping consumers reorganize information from the Web.
When a renowned investor suggests that Google, one of Silicon Valley's biggest home runs and the biggest hit on the Internet, is passé, it sort of pricks up your ears.
Roger McNamee, the founder of Elevation Partners, said just that this week: "With all respect to Google, it is Web 1.0."
McNamee's seemingly derogatory observation about Google (GOOG, news, msgs) -- the greatest search engine in the universe, the god of the Web, the organizer of our cluttered online lives -- was one of many provocative lines to come out of a panel discussion hosted March 27 by the Churchill Club in San Jose, Calif.
The panel pulled together a group of high-profile venture-capital investors, including John Doerr, a partner at Kleiner Perkins Caufield & Byers, who sits on the boards of Google and Amazon.com (AMZN, news, msgs); Tony Perkins, the founder of AlwaysOn; Joe Schoendorf, a partner at Accel Partners; and Steve Jurvetson, the managing director of Draper Fisher Jurvetson.
Jurvetson's thoughts on synthetic life forms and Moore's Law, the panelists' unanimous vote for Apple's (AAPL, news, msgs) yet-to-released iPhone as some kind of savior for the mobile Internet and McNamee's thoughts on Google were part of an hour-long discussion about the top 10 trends over the next 12 months.
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McNamee's remark about Google came amid consideration of investment opportunities in "Web 2.0," the catchphrase for Web sites and services that allow audiences to interact, collaborate and become the authors, producers and stars of their own media productions.
True to the nature of interactive applications, as the celebrated venture capitalists gave their opinions, the 800 attendees voted on whether they thought the predictions would come true by holding up green (for agree) or red (for disagree) placards.
Much of the discussion focused on which companies appear to be doing a better job evolving or innovating as the Web allows for more engagement and collaboration.
Irrational exuberance about to break out?
The topic of Google came up after Perkins predicted there would be a Web 2.0 shakeout in the next 12 months, pointing to YouTube's $1.65 billion sale to Google last year as a potential sign of irrational exuberance about to break out.
If spending is any measure of irrationality, he has a point. About $844.4 million was invested in 167 Web 2.0 deals around the world last year, more than twice as much money and nearly twice as many deals as in 2005, according to Dow Jones VentureOne and Ernst & Young. The United States dominated Web 2.0 investing last year, accounting for $682 million and 126 deals.
The audience seemed to unanimously agree with Perkins, as I noticed a sea of green placards rise above the dinner tables.
The panelists, not surprisingly, disagreed with Perkins. They, after all, have a vested interest in this opportunity. "There's too much money devoted to this sector," said Doerr, of the Amazon and Google boards. "To have this sector decline, we'd have to run out of money."
Indeed, U.S. venture capitalists raised roughly $50 billion in the past two years, according to Dow Jones VentureOne. That's a jump from $41 billion raised in the previous three years.
Schoendorf, whose firm Accel invested in Facebook, Metacafe and Brightcove, is obviously betting big on Web 2.0 and video.
Just getting started
McNamee, whose shoulder-length, rock-star-like tousled hair seems to reflect time spent beside rock musician Bono (an investor in Elevation Partners), articulated why there was more opportunity on the Web because of Web 2.0.
"Web 2.0 will transform real estate and finance," said McNamee, referring to the ability for anyone to help organize information on the Web.
"How do I reorganize content so people can go a million miles wide and a millions miles deep?" he asked. This is the opportunity, McNamee suggested, and "it's just getting started."
It was at this point McNamee suggested Google was vulnerable by saying that the search engine was the early version of the Internet and not innovating like the Web 2.0 companies.
I later followed up with McNamee to clarify his views. "Web 1.0 seems so derogatory. Are you suggesting that Google is not innovating fast enough?" I asked.
McNamee's response: "Google is the zenith of Web 1.0, and it's important to understand that Web 1.0 isn't going away. Interactivity doesn't replace it -- it complements it. . . . Google is incredibly well-positioned."
That said, McNamee added: "Nothing is forever. Microsoft's (MSFT, news, msgs) Windows is not forever. Google is not forever." (Microsoft owns and publishes MSN Money.)
Maybe Google will have to do an Apple. That is, turn out a pretty, chic, hip new search engine.
Apple's iPhone was all the rage among the panelists. The iPhone is going to be "humongous," McNamee said. "I think it will create a whole new way of looking at mobile devices."
McNamee said he thinks women will change their mobile devices as often as they change shoes. They'll be akin to accessories -- appropriate and personalized for the occasion.
"I'm on the waiting list for five iPhones," said Schoendorf, of Accel, in a follow-up conversation. "We'll look back and say that mobile Internet access really became important and the iPhone was the device that made the mobile Internet usable."
Doerr is also an iPhone fan. He believes the cell phone is the next PC and that more people will want their Internet connections wherever and whenever.
His company has invested in M2Z Networks, which wants to provide Internet connectivity for free and is awaiting Federal Communications Commission approval of its plan to build a wireless nationwide broadband network. He declined to comment on McNamee's "Google Web 1.0" remark.
Now, of course it's easy for a journalist to criticize a company for being old news or of an older, slower, less-innovative generation. I really don't see Google as being less innovative than other companies. And, if it is, it certainly is acting fast to remain hip.
But our search experience is hardly ideal. The more time I spend on the Web, the more I demand of the services. I've begun to look at Google's results as a bunch of disparate links that require me to do multiple searches, whereas the Wikipedia results are far more organized and comprehensive.
So, to some extent, Google is indeed Web 1.0, and Apple's iPhone represents something altogether new and exciting.