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Second web boom and bust predicted

Second web boom and bust predicted

Maurice Levy, Publicis Groupe chairman and chief executive, has said he believes the advertising industry could face a repeat of the 2000 dotcom crash as the sector continues to overvalue online businesses.

According to a report in the Financial Times today, Levy warned that there is too little online adspend to support the fast expanding new-media market.

Speaking at the Monaco Media Forum this weekend, Levy said that "far too many people are building plans based on advertising and they may well be disappointed because there is not enough money for everyone".

Levy predicted that the overvaluation of online businesses could trigger a replay of dotcom boom and bust.

"It's exactly the same situation as we saw at the end of the 1990s, when everyone thought that because he had a website he'd get the valuation," Levy said.

"Now everyone building a Web 2.0 operation believes he will receive the advertising."

Despite these comments, Levy said that web advertising would continue to rise even as the rest of the economy experienced a slowdown.

Levy's comments repeat concerns raised by as Barry Diller, head of US new-media business InterActiveCorp.

Diller contested the $15bn valuation of social networking site Facebook suggested by Microsoft's willingness to pay $240m for a 1.6% stake in the business.

"It doesn't mean anything, it is a phantom, false valuation," he said at the Monaco Media Forum. "Let them sell for $14.9bn and then I'll believe them."

By comparison, News Corp bought Facebook rival MySpace for $580m in 2005.

Diller, who last week revealed plans to split his business, which owns Ask.com and Ticketmaster, into five publicly traded companies, said Facebook and MySpace were fashionable trends rather than long-term businesses.


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