Internet Bubble II?

Last week’s LinkedIn IPO created quite a stir.  Not only was the financial services industry on display, as the bankers bought low and sold high within 24 hours; but pundits also began wagging about the Second Coming of the Internet Bubble.

There are about 10 Internet companies in line to bring out IPOs.  Zynga, FaceBook, Pandora, Renren, HomeAway, Groupon, Active Network, Skype, Trulia, Viadeo, Kayak, and Tudou. Experts are predicting a banner year for IPOs.

This exuberance is, supposedly, going to be rational this time.  The irrational kind of exuberance that created and burst the Internet Bubble in 2000 won’t be repeated, the ‘experts’ say, because we understand bubbles better now.  Really?  Somebody should tell the housing market.

Internet Bubble I, which burst in 2000, was generated by the investment banking and financial services industry creating over-inflated stock values in Internet-related stocks.  The Real Estate Bubble, which is still bursting on people, was generated by the mortgage companies and banking/financial services folks creating over-inflated mortgage paper.  Both were ‘exuberances’ of profit-taking for the financial institutions.

This new Internet ramp-up could in fact be the first positive macro market event since international melt-down started.  Internet companies can jump-start the overall recovery.

The 10 big IPOs coming, as well as the tens of thousands of other Internet companies, can sustain accelerating valuations, especially if they match product performance with solid customer service.