Dan Gillmor quizes Bob Metcalfe about the Tech Bubble. Photo by Photo by Antonio Jimenez, aka @eleditor

A year ago, Bob Metcalfe, co-inventor of the Ethernet, told TechCrunch that there is a social networking bubble.
On Saturday, Metcalfe, University of Texas professor of innovation, told a group of 280 journalists that a tech bubble still looms.
He pointed to the recent acquisition by Facebook of Instagram for $1 billion as proof.
Metcalfe made his remarks in response to a question by Dan Gillmor, technology journalist and director of the Knight Center for Digital Media Entrepreneurship at Arizona State University’s Walter Cronkite School of Journalism and Mass Communication. Gillmor covered the dot com boom and bust as a columnist with the San Jose Mercury News. Metcalfe gave the morning keynote address to the University of Texas’ 13th International Symposium on Journalism, held at the Blanton Museum of Art.
Metcalfe is not alone in making the Web 2.0 Tech Bubble assertion.
Since the last bubble burst in 2000, everyone’s been talking about the next bubble. In 2007, the Web 2.0 Tech Bubble Video debuted and got people talking about overvaluations and silly names for companies. Back then Facebook was valued at $15 billion. Now it’s valued at between $75 billion and $100 billion and it plans to go public soon, according to this Washington Post story.
Last week, Dave Winer, software developer, writer and entrepreneur, penned a blog post declaring “It’s definitely a bubble.”
“We’re in a bubble now, and like all bubbles unless you’re thinking about it the “right” way, you don’t see it. That’s how bubbles are. It wouldn’t be a bubble if it were easy to see,” according to Winer.
But I think it is easy to see.
I covered the last tech bubble as a technology writer for Interactive Week magazine. I was based in Dripping Springs, just south of Austin and one day the UPS guy delivered a bottle of champagne to my front door. It was attached to a thank you note from the editor. The staff of about two-dozen reporters pumped out a ton of copy and each one of us brought in millions in advertising. The magazine made a $30 million profit in 2000. Ziff Davis, the parent company, gave us stock options. We got paid a lot better than newspaper reporters. And we held our company retreat at The Broadmoor Hotel in Colorado Springs. We were flying high. I travelled all over the country covering companies in San Jose, San Francisco, Boston, Seattle, Chicago and then it was all over in a flash. The dot com bust hit and the magazine folded.
Many of the companies I wrote about no longer exist: Webvan, Pets.com, Toysmart.com. Austin’s dot bomb list included Garden.com, DrKoop.com and Living.com. Interestingly, Andrew Busey, the then 29-year-old CEO of Living.com, went on to found a string of successful companies and is now a venture partner with Austin Ventures focused on software and Internet startups.
The astronomical valuations for statups with little track record or profits has got to raise a few eyebrows. Just take a look at Groupon. It shows “how social media companies can game the numbers,” according to this Forbes’ article.
Still, it’s up to the market to decide what a company is worth.
Today, Square is rumored to be valuing its startup at $4 billion.
Meanwhile, Twitter’s valuation is pegged at $7.7 billion.
And dozens of entrepreneurs keep getting pumped out of tech incubators like pies in a bakery.
Investors hope one of those pies possesses the secret sauce that makes it the next billion-dollar valuation.
And Instagram, an 18 month old company with no revenue and 13 employees, provides hopes to them that some smart entrepreneurs with a bright idea will be the next billion-dollar startup.
At lunch at the journalism conference, I asked Gillmor if he thought any good came out of bubbles.(Daniel Gross wrote “Pop! Why Bubbles are Great for the Economy.”
Gillmor said absolutely not. He pointed to the last big bubble – the housing bubble and the resulting financial meltdown of the banks, collapse of the housing market, countless foreclosures and mortgage fraud. Gillmor said nothing has changed. The banks have gotten bigger and no one has been held accountable. Regulation has not gotten stricter.
Did the dot com bust have any lasting positive impact? Not for the people who lost a lot of money investing in them.
So when will this tech bubble burst? That’s the multi-billion dollar question that no one seems to know the answer to yet.