Will the Recession Spell the End of Web 2.0?

GigaOM reports that Sequoia Capital, whose funded companies include Cisco Systems, Oracle and Apple, is ringing the death bell for Web 2.0. In a meeting with portfolio companies, Sequoia Capital advised the gathered entrepreneurs and CEO's that Silicon Valley was not immune to the recession.

To bring home the point, Sequoia's meeting featured the image of a grave stone with the message "R.I.P: Good Times." Sequoia Capital's advice to portfolio companies: Cut costs be trimming their staff and, if they need funding, seek it quickly.

Web 2.0 has always experienced difficulty becoming profitable. Even Facebook, arguably the most dominant social network, has had difficulty monetizing its traffic.

The good news: They won't be losing any customers. In fact, web traffic will probably increase during a recession as more people look to cheaper forms of entertainment. Even Internet commerce could see an increase in business considering that it is much easier to search for a good deal on the Internet than to drive from store to store. (Not to mention the savings you get on gasoline.)

The bad news: As the financial troubles spread out from Wall Street, advertising revenue could decrease. Considering this is the primary source of income for many Web 2.0 sites, many will struggle to survive.

(Image by Flickr user brajeshwar with some rights reserved.)