The BBC recons that this time it's different. Yeah, we've heard those words before.

The BBC published a snippy little article today in the wake of a confirmed deal between Google and YouTube. The article speculates that though we may very well be experiencing a new Internet boom, however it stops short of predicting another Internet bust. Several reasons are cited and it's clear that the author is in a bit of denial.

The first claim is that this time Internet companies are real businesses. Evidence of this is in the sheer number of customer or viewers sites like YouTube and MySpace have. But nothing could be further from the truth. These people are not customers, they are users. They don't buy services from YouTube; they consume resources and pay nothing for it. Unless the nature of consumerism has changed in the past five years I'd say that these people were nary customers at all. Leeches is likely a better word.

Second, the idea of making money is first and foremost at these companies. While this is a marked improvement over Web 1.0, it doesn't mean that the current crop of companies are any better prepared to survive the long winter. The problem is that 99% of these sites, Google included, rely upon advertising revenue to "support" themselves. Historically speaking, advertising dollars wax and wane throughout the business cycle and its unclear if companies that aren't sitting on $9.8 billion in cash can survive the drought. Second, advertising revenue is not something that you are going to grow by 15%, organically or otherwise. At best you'll be competiting with a host of other Internet sites and if you are either lucky or good, cannibalize those dollars from other sites.

Third, the idea that since the stock market is not involved (i.e. IPO) there isn't some level of fraud, deceit or outright short sightedness going on. Nothing could be further from the truth. If you are a start-up entrepreneur and your goal is to build a business, set it on the right track and sell it. You are not worried about growth prospects 7-8 years after you sell out. By then the technology you invented is obsolete and you’re sitting on some tropical island sipping a fruity cocktail. When companies realize that they are overpaying for glorified customer lists and fancy designed webpages they are going to balk at the thought of buying any more of them, especially if they aren't already turning a profit.

The underlying theme here is that while some things have changed, most of the rest has stayed the same. Companies awash with capital are desperate to invest in the next big thing. They are willing to take the chance of buying 10-12 web properties if only one becomes the "next big thing", and for the most part that is a rational thing to do. However, as the cycle continues and a few get rich, others with try to cash in with dodgy overnight scams and schemes which will officially bankrupt the entire endeavor. The Googles and Microsofts of the world will lose the stomach for it and all the leftovers that aren't profitable will wither.

In no small part I believe that this is indicative of the larger business cycle and not something merely isolated to Internet companies. If the broader economy is any indicator, this Internet cycle will be small, and as such the bust will be mild by 2000 standards. While we may see innovative concepts chances are we won't see the types of disruptive technologies that forces a dramatic shift in modern life. For those I would look to the next big cycle which looms on the horizon. Yes friends, that day shall come.