Web 2.0: Bubble or New Dimension?

The jury is probably still out on whether Web 2.0 is the next dotcom bubble-in-the-making or a true expansion of the power and usefulness of the Web. When Rupert Murdoch’s News Corp bought MySpace for $580 million last year, many of the bubble proponents thought he was crazy. However, at a recent News Corp investors meeting, Murdoch now claims that MySpace could be sold for $6 billion. Judging from the $1.6 billion Google just paid for YouTube, his estimate might not be far off. That would be a ten-fold return on investment in 17 months. Not bad. Of course, MySpace isn’t currently for sale, so for now it’s pure speculation.

The bubble proponents point to the fact that while companies like Google, News Corp and others are buying some of these Web 2.0 companies for exorbitant prices, the companies they are acquiring are still not making money. That sounds similar to the reason for the original dotcom meltdown, but there are some critical differences that Robert Scoble points out. Scoble is a Web veteran, and he makes some salient points, but I keep remembering a caution I read awhile back in one of those financial tomes about the six most dangerous words in investing: “Yeah, but it’s different this time.”