Bubble, Bubble,...Geez.
Michael Arrington over at TechCrunch has a post entitled "Bubble, Bubble, Bubble" in which he says he believes we're not in a bubble with Web 2.0. I agree, and disagee. This isn't a bubble, this is an extention of Web 1.0 with much cooler heads at the helm and cheaper infrastructure. But still... things could change fast. 1.0 and 2.0 have a lot of similarities.
One example he gave for not being in a bubble is Digg, that ever popular site where you can submit your articles and they are voted up or down depending on how much you're willing to game the system. Arrington says Digg was started for $2,000 and that could be proof we're not in a bubble. But in 1.0 we had Napster which was started in a dorm for what I think, was less than that. Both Digg and Napster ended up taking millions of dollars in VC funding. Could Digg fail? Yes.
1.0 saw copious amounts of "copycat jump-on-the-bandwagon services" started. If something was popular another was started. 2.0 is no different.
Back in 1.0 we had "The Blair Witch Project". In 2.0 it's "Snakes on a Plane". In 1.0 somehow or someway people heard the buzz and went to the site. Today we're led to believe something like "Snakes" could never have happened were it not for blogs. Memories are short, hype last longer - and most of the hype in both cases came from radio and TV telling us how popular these movies had become online, despite not being released in theatres. Does that make "Blair" 2.0?
Back in 1.0 we had buzzwords like "sticky", "network effects", "eyeballs"... that sounds familiar, it's called 2.0.
1.0 was monetized by ads. 2.0? You guessed it.
As noted, it used to take a ton of money just to have the bandwidth to support customers. Nowadays we have places like Amazon helping to subsidize Web 2.0 with their S3 service. Cheap, efficient, worth every cent. That's a big difference.
Today we have new languages everyone has become familiar with, PHP, Ajax, Ruby (and platforms like Rails). We have new tools, RSS and readers. There's 'new' stuff poping up all the time. Or is it old?
Ultimately 2.0 won't ever be a bubble simply by the numbers. It can't because it's primarily online, a huge difference to 1.0 when, as noted in an earlier post, VC's sank $300 million in places like webvan (that could fund 300 Web 2.0 companies and your return would be 100 times webvan. They folded.)
I think really the debate between 1.0 and 2.0 depends on who gets hurt most when a company fails. VC's got slammed in 1.0, as did regular Joe investors. In 2.0, regular Joe's aren't going to get that shot.