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Has The Bubble Burst? The Four Stages of Bubbleness

Posted by Dharmesh Shah on May 29, 2008 8 Comments

Don Dodge posted an interesting article recently on his blog titled "Web 2.0 = Bubble 2.0".

The part that really caught my interest are the four "stages" of a bubble that he describes. Here's a quick summary:

Stage 1: The smart money declares we are not in a bubble.

Stage 2: People agree that we're in a bubble, but declare that there's still a year or two left to make real money.

Stage 3: The bubble has actually burst, but people declare it is just a "temporary setback".

Stage 4: Everyone recognizes and agrees that the bubble has burst, and life will never be the same.

Don believes we're well into Stage 2 of the cycle this time around. I sort of agree, but think we're getting really, really close to being in Stage 3 -- if we're not there already. Though the Web 2.0 bubble may not have burst quite yet, I'd argue that folks are not blowing a bunch more air into the bubble (i.e. so the expansion of the bubble has started to taper off a bit). I could even argue that a little bit of the air is being let out. I could argue that, but I won't.

What do you think? Are we at a point now where the bubble has actually burst, but we still haven't acknowledged it yet?