Did you see it coming? We certainly did but we kept our collective mouths shut about it. But now the cat is out of the bag: the second great internet implosion has begun. Most people have been focused on the burst of the housing bubble and have heard only great things about how facebook and myspace are revolutionizing the internet and how Yahoo! is failing because it missed the social space phenomenon.

We give this a collective ha!. The seeds of the second bubble, what some are calling Bubble 2.0 were scattered into the wind even as the first burst was still a painful ache in our bank accounts. The issue then as now is how to monetize a commodity which is in essence free or so cheap that it might as well be free. For all the talk of a revolutionary of transformative technology, the internet was and remains a giant magazine where the actual cost of the product could never be carried by the cover price or the subscription price and thus the only way to stay afloat in so called "old media" or the new fangeled is to get advertisers to pay for eyeballs. Yes, yes I know people buy things on the internet, but look at the roller-coaster valuation of Amazon over the last ten years, or consider the rapidly rising displeasure with eBay. Both of these sellers extract a fee for something a direct retailer will do for free: sell you stuff.

After the last internet collapse the .com veterans and their venture capital enablers proclaimed that next time they would have a profitable business plan in place before their IPO. Yet we see chimeras like facebook and myspace outrageously over valued and depending entirely on their ability to provide eyeballs to direct advertising or to convince business that buzz marketing is the future and social space networks are the medium for the marketing. Which does nothing to counter the argument against buying ads or even marketing on the internet. First, initial results of campaigns are TOO accurate in measuring the effectiveness of the campaign. Broken down into clicks vs views vs purchases the actual cost of a campaign is not a pretty thing to see. Residual value is of course very hard to measure and is just as fuzzy as the numbers revealed by old-media ads. As for buzz marketing, how will buzz-to-purchase be measured? There is no more irony in the world, the New Yorker last week ran a short story about a New York trendsetter who resents be co-opted into buzz marketing.

The internet that we look forward to is the one that will reduce the cost of doing business and provide constant technological improvement included in a monthly cost of service. Google has started the process with its cloud computing. Users of Google Doc and Spreadsheet will find many, many problems with the system but it does what Microsoft does not: it gets better everyday with out you having to buy a new round of software. Someday Google will be able to monetize these online services as secure business appliances and eventually our hard drives will be free of those hundreds of thousands of jpegs and .docs as we leave everything on the distributed safety net of Google's redundant server arrays.

We don't exactly have Schadenfruede over this coming/here collapse, but anything that drives down real estate prices in San Francisco and Portland is not all bad.