Bubble 2.0

I’ve not really joined in with all this talk of a second dotcom bubble, where clever people suggest Internet firms are setting themselves up for another crash. But it’s hard not to when some speculators start valuing YouTube at $1 billion.

One of the reasons why the first dotcom bubble occurred was that many of the companies behind the unwarranted enthusiasm for e-everything assumed that people were ready to spend money on the Internet, and that minor niggles such as web security wouldn’t be a problem. But not enough “normal” people were relying on the Internet on a daily basis in 2000, and in the years that followed the daily security threats and arrival of hi-tech crime as a viable business ensured no right-minded individual was prepared to reveal their credit card details to the wider web.

Six years later, however, things have changed: Google, a search engine company in 2000, has become as advertising company; eBay, an auction site for geeks back then, is a viable business allowing anyone with a net connection at home to set up shop; and traditional old media firms like News Corp are terrified that their readers and advertisers will abandon the printed page and are snapping up web firms left, right and centre. The web is a viable business, and so many of those predictions about Bubble 2.0 are completely unfounded.

But $1 billion for YouTube? Sure, the website is an incredibly useful resource, and you can waste hours looking at anything from a quirky American’s video diary to re-runs of top TV shows like Jonathan Ross’ Friday night chat show, but the company doesn’t make any money. The potential is there, of course, but at the moment, YouTube delivers 100 million videos per day and doesn’t make a penny.

So, YouTube’s brand and user loyalty accounts for its value, nothing else. Video sharing is a relatively new phenomenan, and with more established names like Amazon, AOL and Google ramping up efforts to get a piece of the action, YouTube fans can abandon the site as quickly as they’ve flocked to it.