Can dotcoms avoid another bubble burst?

The economy is in turmoil -- who would have thought Chrysler and GM would be discussing a merger? -- but it got me wondering: is Web 2.0 capable of riding out this crisis? I think it is, because some very smart entrepreneurs have shielded their companies from disaster.

One case in point is Picnik. I was out at the company a few weeks ago and noticed a few things. For one, they are shrewd about employee perks. There is one small fridge with some juice, but that's about it - there are no extravagant trays of sushi and salmon anywhere. They are nimble: about 20 people it seems, all working in one large area in a rented office. Much of the funding, as far as I can tell -- since they are not a public company obviously -- comes from the chief executives. They made it big in corporate jobs or with other start-ups and they know how to make a company profitable.

The new dotcom era is long on innovative and compelling ideas - things that make you want to keep using the site regardless of the weakening economy. People will want to edit photos online at Picnik. They will want to store data on Box.net. If anything, these services might actually gain traction during a poor economy because people are looking for alternatives and maybe some fresh ideas.

In the first dotcom crisis, there were inventory problems, e-commerce nightmares, technological issues - everyone was learning the ropes. Sticky sites like FaceBook, where we have started using as a prime storage place for photos and an historical record of our written communication, will thrive. For example, I know someone who no longer uses an e-mail account, she only uses FaceBook because everyone she knows and wants to communicate with is using the service.

Digg, even in such a calamitous economy, just got funding. Web 2.0 sites are still popping up like flies at a picnic. And, most of them are small and can scale easily and quickly.

Now, it is not all calm and serene in Web 2.0 land. I see companies such as Amazon having to go lean and mean soon, even though I just bought a pile of songs on their MP3 service. I think what really hurts them is that, for the most part, they sell stuff online and people do not have the money to spend. Sites in a very competitive market - let's say Zoho - have a major challenge because they can't just throw money at problems like building up an image through advertising. The bigger the Web 2.0 company, the more they need to keep pumping life into the brand, whereas smaller sites can remain relatively secure financially with a small and growing fanbase.

Only time will tell which sites can ride out the storm.