It's the signature question in Silicon Valley today: Are all these breathtaking valuations and stock offerings of Internet media and e-commerce companies, from LinkedIn and Pandora to Zynga and Groupon and Facebook, evidence of a new boom or a new bubble?
Tackling the question this morning at the AlwaysOn Silicon Valley Innovation Summit in Santa Clara are Tony Perkins, founder and editor of online publishing network AlwaysOn (and author of a book on the first Internet bubble, in 1999 before it burst), and Bill Cleary, founder of marketing firm Cleary & Partners (and founding partner of CKS, one of the big agencies in that first boom). So these guys should know. (You can view the event live, but I'll be blogging the highlights of this opening discussion, and more to come later.)
Perkins says this time, it's the real thing, not just a bubble. The last time, he says he suggested in his book that people sell the 217 Internet stocks listed in the back of the book. He looked stupid at first, because the Nasdaq then proceeded to leap to its all-time high, before later plunging in early 2000. He agrees with Marc Andreessen--who has transformed himself from Internet wunderkind when he joined with Jim Clark to form Netscape in 1994 to venture capital wunderkind with his suddenly first-tier VC firm Andreessen-Horowitz--that we're in year 15 of a 25-year boom.
In the first 10 or 15 years of the personal computer era, it was amazing to think anyone could sell a million of them a year. When Perkins wrote his book, there were only 168 million people on the Internet, and now there are 2 billion. Point being, the Internet is more pervasive than ever. Cleary agrees we're seeing all kinds of cultural changes and seismic shifts, all due to the Internet. Every single commercial boom, Perkins notes, was built on the back of a financial mania. The good news is we fund the acceleration of the industry. We lay the groundwork for commercial opportunity, but it's after that when all the money is made.
It's also more obvious today what the killer app really is: Perkins thinks it's social networking (though how much money social networking is making outside Facebook is debatable). eBay, interestingly enough, was the first example to show the potential of social connections; people may forget today that it was the hottest company in the first dot-com era for a long time. Today, you walk up and down Sand Hill Road, and if you don't have a social or mobile component to your business plan, you won't get any funding.
So there you have it. The old guys (well, older than all those 20-and 30-something entrepreneurs who were still in school during the first bubble, er, boom) say it's real.
Still, you probably won't want to put what's left of your 401(k) into all those IPOs. Because even if this is a boom, that doesn't mean there isn't also a bubble in selected areas (um, like social networking and mobile). History, as they say, may not repeat itself, but it can rhyme, and we've heard this song before.
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