There is a billion dollar rush from old, long-established media companies to buy into web 2.0. Example number one is Yahoo's purchase last year of photo-sharing site Flickr. EXample number two is News Corp's purchase of MySpace for slightly more than half a billion dollars earlier this year. Now Google, that old, long-established media company, is in talks to buy YouTube for $1.6 billion. Valuations for Web 2.0 companies are rising faster than Steve Ballmer's temper.
Web 2.0 aka dot com 2.0 aka social networking has risen without trace from nothing to the web's collection of most popular sites in just a couple of years. YouTube didn't exist just over a year ago. From zero to $1.6 billion in twelve months. This is a monstrous bubble. Surely it will burst.
My logic? Yahoo, News Corp and Google can afford to buy. Other less financially strong media companies will pile in driving web 2.0 company prices up higher. Consolidation to fewer sites will happen as Yahoo, News Corp and Google market their sites. The second and third rankers won't bring in the revenues needed to pay for the purchases. Whoops. Collapse of dot com 2.0 just like dot com 1.0.
On a related point Google's mission has changed. Priority number one is no longer to bring great search products to market. It's to bring great populations of web users to advertisers. I reckon the products will suffer as a result.