The question of whether there is a Web 2.0 bubble has been out there for a couple of years, and it's now pretty safe to say that the answer to the question is yes. Facebook worth $10 billion – or more? Google at $700 a share, with Henry Blodget predicting a run to $2,000? The Industry Standard "coming back"? What else do you need?

Unfortunately, simply knowing that there is a bubble is surprisingly unhelpful when it comes to the question that matters: what do you do about it?

Will a precipitous short-term decline in Web 2.0 valuations, i.e. a bursting of the bubble, be followed by four to five years of industry-wide "nuclear winter," as happened with the original dot-com bubble? Not necessarily. There are many important differences this time around, the biggest one being that the bubble is in private equity, not public stocks.

Even if we knew what would happen when the bubble bursts, we still don't know when it will burst, which is equally important. Are we in the final stages of inflation, and therefore anyone with the opportunity should sell out now? Or are we still in an earlier phase, when only the weak-willed lose their nerve and jump?

How does this bubble relate to the macro economy? Will the credit crunch bring everything down in a hurry, as logic might suggest, or will the credit crunch in fact ease for the time being and allow everything to continue as usual for a while? If there is a recession, will Internet advertising – the underpinning of Google (and NewWest.Net) and most of the rest of the Web 2.0 hope – take a sudden downturn? Or will the dramatic organic growth overwhelm the business cycle?

I've probably given this whole subject way too much thought, but having been Editor-in-Chief of what was known as the "bible of the dot-com boom" I've certainly had plenty of opportunity to do so. The truth is, we knew, back in late 1999 and early 2000, that what was happening couldn't last, that there was a bubble and it would sooner or later burst. And we said as much in The Industry Standard. But somehow we couldn't translate that knowledge into a survival strategy. I take my share of the blame for that, though I had plenty of company.

If there were a clear prescription for what to do in a bubbly market, well, then there wouldn't be any bubbles. Just because you buy high, doesn't mean you can't sell higher – and thus the basic dynamic. Calling the top is tricky indeed – last time around it wasn't until six months after the initial "pop" that it was clear the party was over.

For a lot of early stage companies, moreover, the harsh reality is that there often aren't a lot of viable strategies in the event of a dramatic market correction. All kinds of things can go wrong in starting a company, or rather all kinds of things have to go right to succeed. Contingency planning for very difficult situations not of your own making – like a collapse of your market – can seem like a waste of time.

Maybe, then, the question "is there or isn't there a bubble?" is not the right question at all. In retrospect, recognizing the original dot-com bubble for what it was in a timely fashion was, at best, only half the answer. Nobody wants to get burned again. But there's no reason to think navigating the frenetic Internet business will be any simpler this time around.

---

Jonathan Weber is the founder and editor in chief of NewWest.Net, a regional news service focused on the Rocky Mountain West in the United States. He was previously the co-founder and editor in chief of the Industry Standard