Just like the dot-com bubble of the 1990s, is Web 2.0 a bubble waiting to burst? Analyst firm Research and Markets says that it is:  

“The Internet changes everything” was a common phrase in the 1995-2000 period. Indeed, a lot of things did change for business, but a lot of things stayed fundamentally the same. Anyone who had the nerve to say that some early Internet businesses were overvalued, that there was a bubble and that many of the ventures had no business fundamentals was decried as someone who didn’t “get it.” …  

Today, the Web 2.0 phenomenon is being described as another bubble in the making, although few have the public nerve to predict when the bubble is going to burst. … By taking a realistic approach to Web 2.0, both types of stakeholder can help ensure that the baby is not thrown out with the bath water when the bubble does burst. 

OK, everybody just relax. There’s no question that the Web 2.0 “phenomenon” has suffered its fair share of hype, but to say the current situation mirrors the heady dot-com days of yesteryear is a bit of a stretch. 

Yes, there’s no shortage of Web 2.0 evangelists predicting that blogs, wikis, mashups and so on are “changing everything” — much like those who in the 1990s declared that e-commerce was reshaping life as we knew it. Maybe it will; maybe it won’t. 

The major difference between now and then, however, is that venture capitalists are much more selective about which Web 2.0 companies they back and how much they invest. During the 1990s, that was hardly the case; any two-bit programmer with a dial-up connection in his garage could land big bucks from hysterical VCs eager to cash in on the so-called Web boom. 

As Scott Duke Harris of the Mercury News wrote earlier this month, VCs also have significantly less influence now than they did then, because entrepreneurs themselves are more savvy and self-sufficient: 

Once upon a time on the Web, there was a lot of talk about “burn rate” — a phrase describing the way start-ups like Webvan and Pets.com went through venture capital like a blowtorch. Many flamed out. 

Today, the operative phrase is “bootstrapping.” In “Web 2.0,” a term reflecting the medium’s maturation into a dynamic, cost-effective business platform, penny-pinching entrepreneurs simply don’t need venture funding as much as they used to. 

Consequentially, the business fundamentals of many current Web 2.0 startups are actually pretty solid. A number will inevitably fall by the wayside, as a certain percentage of startups always do. But there’s no reason to believe the Web 2.0 phenomenon is a bubble waiting to burst. Blogs and wikis, which are relatively cheap to develop and deploy, have already proven their worth in the consumer market and the enterprise, and you can expect them to continue doing so for years to come.