Ron Conway: Out with the New, In with the Old

As the criticism of VCs mounts in the wake of their realization that there just might be some benefits to this whole “revenue thing,” we’re getting no shortage of proof that some of Silicon Valley’s most notable investors are “no more intelligent or talented than an orangutan.”

A perfect example of this fact is Ron Conway, who sat down with Kara Swisher yesterday in San Francisco.

In their discussion, Conway cites the following “new” trends:

• Cloud computing.
• Crowsourcing.
• The “how to” space.
• The semantic space.
• Video.

Let’s take Conway’s first “billion dollar new market” – cloud computing. Larry Ellison recently called cloud computing “the Webvan of computing” and stated:

The interesting thing about cloud computing is that we’ve redefined cloud computing to include everything that we already do. I can’t think of anything that isn’t cloud computing with all of these announcements. The computer industry is the only industry that is more fashion-driven than women’s fashion. Maybe I’m an idiot, but I have no idea what anyone is talking about. What is it? It’s complete gibberish. It’s insane. When is this idiocy going to stop?

Ellison is, of course, right (and I’m not just saying that because I usually listen to the guy who owns the most yachts). There’s nothing new about “cloud computing” and “software-as-a-service” and for those who think that the buzzword will create billions, it’s worth noting Ellison’s observation that “software-as-a-service” poster child Salesforce is “barely profitable.”

To give Conway some credit, however, I should point out that Webvan at one point had a billion-dollar market cap. I guess for those who like short-lived paper wealth, that counts.

Moving on to crowdsourcing, Conway says there’s “opportunities where you use the wisdom of crowds” but isn’t this what Web 2.0 was all about?

Tim O’Reilly says Web 2.0 is about “harnessing collective intelligence” and Newsweek’s big fluff piece at the height of the Web 2.0 hype was entitled “The New Wisdom of the Web.”

It reported:

Tim O’Reilly, an early promoter of the Web 2.0 idea, says, “The central idea is harnessing collective intelligence.” This sounds lofty, but is actually happening all the time on the Web. Every time you type in a search query on Google, what’s happening under the hood is the equivalent of a massive polling operation to see which other sites people on the Web have deemed most relevant to that term. Magically, it yields a result that no amount of hands-on filtering could have managed. “It’s clear that the Web is structurally congenial to the wisdom of crowds,” says James Surowiecki, author of a book (”The Wisdom of Crowds,” naturally) that argues that your average bunch of people can guess the weight of a cow or predict an Oscar winner better than an expert can.

I hate to burst Conway’s bubble (no pun intended) but crowdsourcing isn’t new and Conway might want to look at the fate of Cambrian House before he invests in that next big crowdsourcing play.

What about the “how to” space? Frankly, I don’t know what Conway was mumbling about. I hope he wasn’t referring to services like eHow, which originally launched in 1999 and already has one bankruptcy under its belt.

As for the semantic space, individuals have only been working on this for years. And given the fact that Powerset and Hakia haven’t exactly taken over the world, it looks like Conway is excited about something that really isn’t new.

Which brings us to video. Conway extols all of the innovation that is taking place at YouTube. Which is part of the problem: Web 2.0 only had one YouTube. In an interview with CenterNetworks earlier in the year I noted:

The truth is that far too much money was invested in startups chasing the same dream. Take online video: dozens of startups, many of which have no differentiation whatsoever, received funding, some of it sizeable.

VCs looked at YouTube and threw far too much money at online video plays because their funds had to have some presence in the market. The outcome of this is inevitable. Personally, I think it will be entertaining to watch.

So while Conway is correct that online video (read: content) is a multi-billion dollar industry, he’s obviously mistaken in believing that there’s going to be some sort of equal sharing of the wealth. There isn’t. As markets mature and grow in size, the case is quite often that the growth in total revenue is realized primarily by a smaller group of dominant players. Expect this to be the case with online video.

If you haven’t figured it out by now, Conway isn’t a visionary.

And lest you believe that I’ve only based this on comments from a single interview, I’d point out that at TechCrunch50, in response to the Blah Girls presentation, Conway stated “There’s a new multi-billion dollar market developing before our eyes.”

What was that multi-billion dollar market? Product placement.

The only problem, of course, is that product placement has been present in the television and film industries for decades. Over $2 billion was spent on television product placement back in 2005 and if Conway doesn’t trust CNBC, I can personally vouch for this: one of my friends has brokered millions of dollars worth of product placement deals for television properties over the past several years.

I assume Conway meant to make the distinction that product placement would move on to the Internet but his belief that this will be a “big revenue driver” that takes its place alongside search and display advertising highlights the fact that Conway knows nothing about product placement and has never watched a product placement deal be negotiated.

But I digress.

If Conway’s interview with Swisher makes one thing evident, it’s this: VCs don’t have a clue. They’re trend followers, not trend spotters. They’re in the business of “spraying and praying” and we simply mistake their big winners for some sort of uncanny prescience.

There is no prescience. When the best “new” trends a prominent investor like Ron Conway can come up with right now are cloud computing, crowdsourcing, the “how to” space, semantic search and video, it doesn’t take a whole lot of intelligence to see why Silicon Valley finds itself in a bubble so frequently.