Techcrunch reports that Jingle, which operates Free411, a free 411 service, has raised $26M in new financing from a group of VCs.

The good news is that Free411 only has 1.5% of the 411 market, yet it handles 7 million calls a month.

The bad news, of course, is that like 98.5% of the rest of the new tech-related companies we read about, Free411’s business plan revolves around that old Web 2.0 standby- advertising. Callers are required to listen to a 12 second advertisement during each call.

Those advertisements are supposedly ads for competitors of the place you are calling. You can choose to call the advertiser instead by pressing 1 during the call. If there is no local advertiser for the business you are calling, the business you are calling gets a telemarketing call about signing up as an advertiser. I doubt that will make their day (I am a little dubious of the claimed 13% success rate). Nevertheless, there is something fundamentally clever about this system.

And it’s worth noting, that while this service is based on ad revenue, it is not based on online ad revenue. While there are competitors, such as 411-Metro, the space is less crowded that many others.

But what happens if you call for a residential number? Or for a company with a name that doesn’t indicate what it does? Or a governmental number. Or, or, or….

At the end of the day, I am reasonably impressed by their structure. Not $26M impressed though. I just don’t see the big payoff here. My cell provider doesn’t charge extra for 411 calls and even if the free 411 concept takes off, what prevents the existing telecos from doing the same thing?

Adam Lashinsky has an article in Fortune (and online at CNN) today about the “new Net boom,” and how to invest in it without getting burned (again). If I’d written this article, it would have had a word count of 1: don’t.

The article makes some good points, however, and, thankfully, is more concerned with the Ciscos and the Googles than the Facebooks and the 13,451 or so online calendars.

It begins by correctly pointing out that when Bubble 1.0 burst, the internet kept on being the internet and has become more and more integral to our lives:

You don’t need us to tell you that today the Net is fulfilling many of the visions its wild-eyed prophets were preaching about just a few years ago. All the impossibly cool applications that seemed so elusive in the late 1990s–Internet phone calls, (legal) downloadable music and movies, high-speed web access on cellphones, online bill paying–are a taken-for-granted part of daily life.

Plus, many more people have broadband internet access now, making the pool of application users bigger than before.

It even addresses (kind of) my greater fool/IPOs in the making concern:

We know what you’re thinking right about now: If there’s a boom underway, then the Wall Street crowd must be fixing to sell us something. After all, we’ve been down this path before. But the investing landscape is very different this time.

In sum, the article says that new reporting requirements and the lower price of net stocks will work to prevent a bunch of silly IPOs.

Maybe. But as soon as the greater fools start believing the the lesser fools are nosing around on the net stock aisle, I suspect there will be plenty of products brought to market. They are working on the supply and waiting on the demand.

Before I invest in any meaningful way in any new net companies I need to see a business plan based on selling something other than ads and an exit strategy other than the hope of getting bought.

Too much of the new net world is being built on top of advertising revenue. I’ve said it before and I’ll say it again and again.

Advertising cannot support the weight of all these so called businesses for the medium or long term.

If you don’t agree with this, just wait. And watch.

I have talked about Digg before, and I am very impressed with the technology behind the site. I’ve also said before that I don’t use Digg very much because I don’t like the “news by contest” format. In other words, I don’t really want the content presented to me to be based on votes received by a bunch of people whose interests may or may not be compatible with mine.

Part of the problem is the potential for people to vote stories to the top of the list based on factors other than merit. I have no reason to believe that ballot stuffing is a problem at Digg. But logic and human nature has always told me that it could be.

Today brings a post at Forever Geek that may have uncovered some irregularities in the voting process. The story was fairly even-handed and while I don’t reach any firm conclusions from the data presented, I do find it troubling that Forever Geek was apparently banned from Digg as a result of the post.

I missed it at the time, but David Johnston at Real Tech News posted about a similar issue back in December.

I don’t know if people are monkeying around with the Digg process or not, but banning someone for posting objective data and raising the question is not good PR.

It’s bad PR and it makes you look guilty, whether you are or not.

With every new funding of the latest high school science project turned business, more and more people start talking about Bubble 2.0.

I have been talking about it for a while, as have Steve Rubel and others.

Today, Mark Evans jumps onboard the bubble train:

The signs of doom are increasingly evident – VCs are scrambling to get a stake in start-ups with limited track records; valuations in the M&A market are climbing, and 20-something entrepreneurs are being seen as cool and credible again.

As I have said so many times before, these folks aren’t doing the start-up thing as a hobby any more once serious money gets involved. No, they are trying to make a lot of money.

Money that is sitting in our pocketbooks, mutual funds and brokerage accounts.

Mark cites a San Francisco Chronicle story as a sign that it’s time to head for the hills. More and more use of the term IPO means it’s time to take our money with us.

I’m sitting here in my $400 a night room (and by room, I mean room, not big room and not suite) at the Hotel George in Washington, DC getting ready to give a lecture on ethics at Georgetown Law School. I’ve made my lecture notes and I have an hour or so to kill before I head over to the lecture hall and then rush to the airport to fly back home.

So I decided to read some of my feeds and see what’s going on in the blogosphere. And I came across a great article.

Paul Boutin has an article at Slate about Web 2.0. It does a yeoman’s job of explaining what Web 2.0 is, what it isn’t and why it means different things to different people.

Paul begins by looking to Tim O’Reilly for a definition of Web 2.0. What he gets is a bunch of technobabble that will confuse many, irritate some and enlighten none:

Web 2.0 is the network as platform, spanning all connected devices; Web 2.0 applications are those that make the most of the intrinsic advantages of that platform: delivering software as a continually-updated service that gets better the more people use it, consuming and remixing data from multiple sources, including individual users, while providing their own data and services in a form that allows remixing by others, creating network effects through an “architecture of participation,” and going beyond the page metaphor of Web 1.0 to deliver rich user experiences.

That’s a “pre-owned cars” take if ever there was one. Dude, just because you’re a smart guy with a big platform doesn’t mean you can’t use regular words. Answer the question in a way that a normal person can understand. No one I know would get past the second line before writing off Web 2.0 as either a creation of the media or a buzzword for the nerd set.

If I ever get asked by one of my real world friends what Web 2.0 is, the first thing I’ll do is faint. When I come to, I’ll say it’s a buzzword created by tech writers that refers to a new generation of online computer applications that generally promote social interaction via user-created content and user-supplied keywords that describe and organize that content. Some of these applications are core to that process and some are supportive by organizing the data into searchable lists and databases.

Paul goes on to describe other definitions of Web 2.0 used by other segments of the population.

Developers generally use Web 2.0 to refer to “gee-whiz features” of newly developed web sites, which are often based on Ajax, tag clouds, wikis and other collaborative tools. In general, these features are free (which is problem number one when someone tries to, say, sell one of them for $2B dollars), easy to master, and easy to interconnect.

And then comes the specter of Bubble 2.0:

A third definition gets thrown around in Silicon Valley. A “Web 2.0 play” is a bid to make money by funding a bring-your-own-content site. It’s a long-shot but low-risk investment that could become the next Google. Or at least the next thing Google buys.

Bingo. I’ve said it many times and like a street preacher I will keep saying it until the cops run me off: as long as these companies and their VC handlers don’t get desperate and start trying to take these science project turned companies public, that’s fine. But we’re starting to read more and more about IPO’s in the planning.

When that starts happening, we’ll know that Bubble 2.0 has reached a critical and dangerous stage.

Fortunately, Paul says that at least some writers and editors are hip to the salesmanship game that is sprouting up around some of these products:

Beyond that, publicists and self-promoters invoke Web 2.0 whenever they want to tag something as new, cool, and undiscovered- “This could be a big story for you, Paul!” That kind of hucksterism is what sends editors reaching for their red pens.

That’s a good thing, because many more Newsweek stories and Web 2.0 may become a momentum play for the non-geek retail investor. When that happens, the huffing and puffing will grow geometrically and all that will be left will be to watch the lesser fools get wealthy while the greater fools take another bath.

Paul goes on to argue that, at least as of now, Bubble 2.0 doesn’t look as dangerous as Bubble 1.0 was. I agree, for now. But you get Wall Street behind a few of these non-companies and let a couple of them make it out of the gate without a total disaster and you’ll see a race towards our pockets that would rival the last one.

Here’s to doing our part to keep that from happening, again.

Technorati Tags:
web 2.0, bubble 2.0

More evidence of huffing and puffing beneath Bubble 2.0, in the form of three hilariously troubling quotes.

Quote 1

First this one from “senior industry executives familiar with the matter,” as reported by Steve Rosenbush of BusinessWeek Online, about the proposed sale of Facebook:

Facebook, the Web site where students around the world socialize and swap information, has put itself on the block, BusinessWeek Online has learned. The owners of the privately held company have turned down a $750 million offer and hope to fetch as much as $2 billion in a sale.

One guy told Steve that Viacom, which owns the MTV, VH1, and Comedy Central cable networks, might be a good buyer for Facebook.

Hey Viacom, I have a 2001 Ford Expedition in good shape that I’ll sell you for $250,000. I’ve got some used power tools in the $15,000 range each. Call me. We can make a deal.

Quote 2

But the best quote from that article is this one:

[$2 Billion] may sound like a huge amount of money, especially when you consider that the company was launched just two years ago by a group of sophomores at Harvard University.

Ya think?

Quote 3

And the third and best quote of all comes from Russ Beattie in reaction to the above article:

I think my brain just blew up.

Mine too, Russ. And I’ll tell you what else is blowing up: Bubble 2.0, that’s what.

And a Sane Voice Says Calmly

Rafat Ali does his best to keep at least one of our collective toes in the pool of reality by pointing out:

[E]veryone, including Viacom, has looked at [Facebook] multiple times, parsed the valuation and options, and still could not think of a logical business reason for ponying up that kind of money. What I do know, from my sources, is that Facebook closed on a “huge round” of funding last week. So I would say the acquisition part is off the table, for now. [The] $2 billion figure is at best, hearsay, and at worst, media manipulation.