Mark Evans has been taking some flack for a post he made on his blog a few days ago, talking about the second internet boom a.k.a. "Web 2.0" and his forecast of the imminent bust on the horizon given a) past learnings, and b) future inevitability.

As somebody who worked for one of the smarter (read "still in business in 2006") incubators during the first boom, and subsequently was laid off as a result of the first bust, I can vouch for some of the similarities I’m observing this time around:

• The focus is on growth & popularity versus profitability & sustainability. I was originally going to prove this point with a few articles that call into question the earning potential of many of the Web 2.0 companies landing big VC placements.  But instead, I decided to take the "Rick Segal proof" approach and use Google search results as a metric.  Googling "myspace popularity" (with quotes) yields 15,900 results while "myspace profitability" brings up 0.  That’s right, zilch.  Not a single page indexed in Google contains the words myspace and profitability together.  This BusinessWeek article covering the acquisition of myspace by News Corp. doesn’t even contain the words revenue or profit. So not even those who watch the company from the outside looking in seem to be talking about Myspace’s profitability. [sidenote: during the 10 minutes it took me to write this post, the Google results count for "myspace popularity" went up to 16,000]

• The land grab for users/members is a common #1 Objective.  In the absence of revenue, many companies in the last dot-com wave were able to convince their investors that building a massive user base was as good, if not better, than generating revenues up front.  They persuaded those cutting the cheques that as long as they had more users/members than their competitors, they would be able to "flip the revenue switch" whenever they wanted and have instant profitability.  Were they right?  Ask the seventeen dot-com companies that each paid over
  $2 million for a 30-second spot during the 2000 Superbowl.  Ask the countless millions of employees who ended up rolling and smoking their stock options to extract the maximum value out of those precious pieces of paper.

One of my favorite posts characterizing the re-birth of crazed early stage investments is this one equating it to partying by a VC in The Big Apple.

Don’t get me wrong…I’m all for innovation and experimentation.  But come on people, that Kool-Aid is 6 years old.  Let’s at least make a fresh batch that’s a bit lower in sugar and artificial colours.

Update:  looks like there’s a fair bit of this sentiment kicking around.  I read a couple of related posts on Om’s and Stuart’s blogs this morning.