Regarding a "Second Tech Bubble"

Discussion has been floating around for quite some time regarding a Second Tech Bubble. Web 2.0 has been labeled as such by just about every major mainstream news source over the past year, and yet venture capitalists keep puring cash into new ventures, in hopes of discovering the next Facebook or MySpace. So, do the VCs know something that the rest of us don't? Is it really the allure of finding the next Google that keeps them going, or is social software here to stay?

I believe that venture capitalists and enterprising young entrepreneurs both realize that social software is here for the long haul. Not only is it here to stay, but it will play an increasingly important part in the economy, and and in our daily lives, over the next five or so years.

Whether we'll admit it or not, we really are in the midst of the second iteration of the web. Our physical lives - who we're friends with, what we do, and what's around of physical selves, is now as much a part of the internet as the modular pieces of information that comprise the traditional website.

One might argue, however, that what exists now is just the beginning of our web-life integration. Even now, we can live life without the internet, even if for only a short time. Soon, our physical lives and internet presences will be so intricately intertwined that one would be almost incapable of existing without the other. Then perhaps, the connections with the people, places, and information of the world will exist not only while we're at our PCs, but will be with us always, no matter where we go. Perhaps the journalists will call this Web 3.0. I'll leave the dramatic labeling to them, and just stick to saying that it will happen.

However, it isn't all rosy on the Web 2.0 front. Perhaps the valuations for the social networks of today are a bit over-the-top. Microsoft's recent investment in Facebook values the service at approximately 15 billion dollars. It's been said that MySpace is worth many times this ludicrous sum. The truth is that these services aren't worth one-tenth there valuations - as they exist right now. The ideals they represent, and the potential revenues their user-base could bring in, are the bases for these valuations.

Will earnings grow into their reported valuations? Perhaps. These networks would need to find revenue schemes that match the values of their user communities, and leverage their unique user-bases to find new ways of earning money. They have the potential to be worth what people say they're worth, but as it stands now, they're really not worth a fraction of what's reported in the news. In the near future, these social networks, or perhaps new ones that don't yet exist, will find ways to create value from the communities they establish.

Lets just hope that it happens soon; Otherwise we really may be in the midst of a second tech bubble....