The online sector has been pretty robust in these recession-dominated times, and indeed all those who predicted continued growth (rather than decline) for the web's biggest players were, of course, right. Various online markets have continued to expand and, though ad spend has in some areas taken a knock, the sector has on the whole been relatively protected from the mass lay-offs and declining demand experienced by the manufacturing sector for example. There's not been much need for Google, Microsoft or Apple to go asking for government bailouts...
However, when it comes to the case of the web's smaller players - and especially currently fledgeling start-ups, the problems are fairly acute. With such small profit margins or reliance on outside investment being the key component of their business models, the lack of money elsewhere is having serious knock-on effects here (see the case of visual search engine Riya, or url shortener Tr.im).
Similarly, failing acquisitions bought up by larger players are now being quickly dumped by their owners, conscious of the need to tighten the ship (e.g. Canadian photo-sharing site Bubbleshare, part owned by Disney). In essence time has run out for assets which were in serious need of work - it's now far more sensible to simply abandon messy performers and cut losses.
(N.B. I haven't provided many examples above - instead, for a comprehensive list, visit the Techcrunch DeadPool - a collection of 'obituaries' for web 2.0 companies closing their doors/domains in the recession)
In essence the recession will hardly even come close to killing off the start-up sector - and perhaps all that is happening - in a wider sense - is that the initial requirements needed for getting something off the ground are becoming slightly more demanding. Perhaps this might just work to make the level of innovation better by virtue of increasing competetion? (I don't want to diminish the seriousness of the consequences for those losing jobs, which must be awful, but simply to view the process on a more long term scale).
I guess that ultimately i'm trying to drum up something of a silver lining to the cloud that now seems to be hanging at least in part over the web sector too. Maybe we'll have a case of sorting the wheat from the chaff - as for example is the case with tr.im. After all, it was always inevitable that with Tinyurl, Bit.ly and others also competing, some would have to bite the dust sooner or later. Perhaps the recession has just accelerated a darwinian/capitalist process of natural selection. Furthermore, clearly some failures provide valuable lessons of how and where markets and developments have been misguided or misapplied. If we can learn from them, maybe we have an opportnity to improve things elsewhere...
Dejan Levi
