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dave on the bubble burst

Dave has an interesting piece on the web 2.0 bubble bursting and how to determine that since for the most part these companies are not public. His theory is that when the Google stock bursts that’s how we’ll know.

It’s an interesting theory, but I think his analysis is off. First, how many web 2.0 sites are there really? Let’s say it’s 10,000 which seems too high but that’s fine. Google has it’s ads on millions of sites. Second, Google is already a profitable company which is something the web 1.0 public companies never were. That’s a huge difference. It makes it extremely unlikely that you’ll have an instant collapse like 1.0.

Unlike 1.0 not only is Google profitable, but it’s growing at a very high rate. Wall st. loves stocks that have a high growth rate and as long as that continues the stock will continue to climb. Web 2.0 sites have very little effect on the overall volume of search traffic at Google which is still where the vast majority of growth and revenue come from.