Bubble 2.0 or just Hype 2.0 ?

Was reading all the hoo ha on TechMeme about whether the whole Web 2.0 thingy is a bubble or not.

Latest pugilist in the Bubble Corner was PC World's John Dvorak

Latest in the "I'm making a good living from this" corner are Marshall Kirkpatrick and Don Dodge ( )

So, is it a bubble or no?

The main relevant characteristics points about "is it a bubble" are (from Bubbles and How To Survive them)

Rapidly rising prices (think YouTube, Skype)
High expectations for continuing rapid rises
Overvaluation compared to historical averages
Overvaluation compared to reasonable levels
Several years into an economic upswing
Some underlying reason or reasons for higher prices
A new element, e.g., technology for stocks or immigration for housing
New investors drawn in
New entrepreneurs in the area
Considerable popular and media interest

Typically there are some other things going along in background......

Major rise in lending
Increase in indebtedness
New lenders or lending policies
Consumer price inflation often subdued (so central banks relaxed)
Relaxed monetary policy
Falling household savings rate
A strong exchange rate

I think you can see where this is going....if it looks like a bubble, talks like a bubble......

However, to be fair to the Don - Marshall Brigade, so far there is something missing, which is the "you know its a bubble when your cabbie is giving you advice" element - thats typically the endgame, when the greatest fools (Joe Public) are being lured in as the smart money gets out - arguably as is happeing with Hedge Funds now as they offer "opportunities" for Joe Public to get in.

So, the conditions for bubblehood are all there, but I think we are on bubble foothills - I like the Gartner concept of the "Hype Cycle" curve

There are 5 stages:

1. "Technology Trigger" (Hurrah...a new new thing for the chatterati)
The first phase of a Hype Cycle is the "technology trigger" or breakthrough, product launch or other event that generates significant press and interest.

2. "Peak of Inflated Expectations" (an irrational exuberance)
In the next phase, a frenzy of publicity typically generates over-enthusiasm and unrealistic expectations. There may be some successful applications of a technology, but there are typically more failures.

3. "Trough of Disillusionment" (an overcorrection down)
Technologies enter the "trough of disillusionment" because they fail to meet expectations and quickly become unfashionable. Consequently, the press usually abandons the topic and the technology.

4. "Slope of Enlightenment"(ie a return to rational valuations)
Although the press may have stopped covering the technology, some businesses continue through the "slope of enlightenment" and experiment to understand the benefits and practical application of the technology.

5. "Plateau of Productivity" (guys who wear suits start to do it too)
A technology reaches the "plateau of productivity" as the benefits of it become widely demonstrated and accepted. The technology becomes increasingly stable and evolves in second and third generations. The final height of the plateau varies according to whether the technology is broadly applicable or benefits only a niche market.

Right now I think Web 2.0 - or the Social Networking element of it anyway - are well on the way up to the "Peak of Inflated Expectations" (Facebook the new operating system of the web - whaaat ???).....but to make a real bubble a whole lot of the other Web 2.0 contributing areas have to ascend at similar times, and a long way - ie, to use that word so beloved of VC 2.0, it has yet to get real traction outside of the media and a few over-the-top acquisitions - the big banks are still way out of it.

So all in all - yes, I think we are at the beginning of a bubble, but it may still lose air if the early fizz goes away.....

(Postscript - but if your cabbie is on Facebook - beware