This Economist cartoon suggests Facebook’s value is overblown; but what if social networks become the “Good Morning Americas” of the Web generation?

I observed, covered and suffered through the dot.com bubble. Moreover I have a natural antipathy to excess — at least as regards the hype that seems to accompany the rapid acquisition of wealth. So while I can certainly understand the talk about a Web 2.0 bubble, a supposition that Online Publishers Association spread in a recent Intelligence Report that pulled together press coverage of the Microsoft investment in Facebook.

I understand how the size and terms of that deal has stoked the bubble talk. Hell, I wish someone or something would pay $15,000 for one percent of MiniMediaGuy.org. (That is roughly what it would cost to replace my 24-year-old shake shingle roof which looks bad but has not yet begun to leak.)

However no such investment will ever occur because this site does not meet what entrepreneurs and investors seem to have agreed are the prerequisites of a fundable Web 2.0 idea: a strong working prototype with a cash flow, ideally a positive cash flow, a viral adoption rate and thus the indication that the a shot of capital would help the thing take off rather than provide the startup kids with really cool swivel chairs. 

For instance, visit Outside.in, a site based in Brooklyn that has created a news-scouring system that notes the geographic locale of incoming IP addressed and serve even the first time visitor a reasonably localized offering of news, blogs and photos. Plug in your zip code and — assuming you don’t live in one of the Big Empty places where cows and cornfields outnumber people and parking lots — the search software will refresh the page and bring the selections closer to home. Outside.in says it has tuned its system to 3,400 neighborhoods in 55 cities. I have previously blogged that Outside.in has so far taken $2.4 million in venture cash. Who can say whether the site will ultimately succeed in creating some gigantic neighbood-portal-in-a-can but I’m impressed by how much functionality this outfit has been able to build for what seems like a modest investment. (Here is my first posting on Outside.in.)

So I see no generalized froth in Web 2.0 land, certainly nothing approaching the abandon that typified company formation during the dot.com period. Even the Facebook deal, which may be overblown in some sense, could prove out. At a recent cocktail reception i found myself chatting with a senior sales exec for a social networking site (not Facebook). Just to be argumentative I suggested that social networkig would be a passing fad. Not so said the sales exec, putting the question to me, What do you do, first thing in the morning? Check email? I nodded. Well, the seller said, what we’re finding is that young people log on to their social networks the way old farts like you obsess about email. The speaker did not actually say “old fart” but it was implicit and truthy.

That exchange got me to thinking about what constitutes value in an Attention Economy if not habitual behavior in which a person dedicates a certain amount of time per day to a given site?

With that in mind I fished the following extract out of a generally-skeptical Economist article:

“Facebook has made two genuine breakthroughs. The first was its decision to let outsiders write programs and keep all the advertising revenues these might earn. This has led to all kinds of widgets, from the useful (comparing Facebookers’ music and film tastes, say) to the inane (biting each other to become virtual zombies). The entire internet industry reckons this was clever and is planning to copy it.  . . . Facebook’s second masterstroke is its “mini-feed”, an event stream on user pages that keeps users abreast of what their friends are doing—uploading photos, adding a widget and so on. For many users, this is addictive and is the main reason they log on so often. Jerry Michalski, a consultant, calls the mini-feed a “data exhaust” that gives Facebook users “better peripheral vision” into the lives of people they know only casually.”

As an old fart who is also a newspaper reporter and therefore has no friends, only sources and potential sources, I would have little use for such peripheral vision. But it strikes me that other other people might. Estimating how many people might use social networks how often to support what valuation for any given deal is spreadsheet work. I am merely a word guy so what would I know. 

But I’ve gotta believe that somebody out there is working on next-generation coffee-making widget that would not only start my machine in the morning but also add enough rules-based artificial intelligence to sift through the headlines and decide: The news sure is grim; MiniMediaGuy is gonna need a doppio.