What nailed Kiko was Google Calendar. Once that came out, not only did Kiko's growth stop, but a lot of existing users defected. Justin and Emmett told me a large fraction of Kiko's users had Gmail addresses.

The killer, unforseen by the Kikos and by us, was Google Calendar's integration with Gmail. The Kikos can't very well write their own Gmail to compete.

While I don't think this case implies the party's over for web startups, it is significant in one respect. It seems to be the first example of Google benefiting from the Microsoft Office effect. In the 80s and 90s, Microsoft gradually killed off the competitors of its individual applications by making them tightly integrated. Obviously this works for web apps too.

If Goggle is the new Microsoft, thats actually great news. Why? Because Microsoft is the old Microsoft, and they are now chasing Google, which demonstrates the precariousness of market leadership. And the cycle is speeding up.

So Google has more cash than you " a LOT more. And theyve hired a LOT of smart people. But that doesnt mean they are always smarter. Smart people do notoriously stupid things. And it doesnt mean they have cornered the market on innovation or creativity.