Well, that didn't take long.

SXSW Interactive 2010 brought the hype, people sobered up, and now the backlash is beginning.

Mark Hopkins kicked it off on March 31 and yesterday Dave McClure jumped in.  They've observed a few things, most notably:

  • Even the most successful LBS startups don't have a large enough audience to truly matter, especially for advertisers,
  • There is no evidence of a mainstream consumer phenomenon around these apps yet,
  • The only reality so far is that LBS apps are hot among the early adopter innovator crowd, and that crowd is serving more or less as an echo chamber and nothing more.

I don't have a problem with LBS startups.  In fact, I've talked with just about all of them in some capacity over the last year or so and there are good people in those companies.  But I do think as I've stated here before that I think the hype/reality ratio is way out of whack right now.  Valuations are in the stratosphere.  Yet, these folks have a lot of work to do to succeed in a way that justifies those numbers.

If you put me on the spot, I'd suspect that one or two will do very well but that there will be a lot of people left out as well.  Those will be the next iteration of a long line of over-invested, "next big thing", and hysterically overhyped companies like Webvan, eToys, DrKoop.com, Boo.com, and others whose biggest achievement was a massive fundraise.

Just my two cents… more to come on this topic that I just find way too fascinating.