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It’s easy to reminisce about 1999 and laugh at all of the silly dot coms getting millions of dollars in funding. Hindsight, after all, is 20/20. Of course “eyeballs” aren’t enough. Of course paying consumers to surf can’t work. The list of silly business plans is very long.

Today – six years into the new millennium – many think we haved learned our lessons. The shining stars of the Internet world are companies that have actually produced revenue and profit. Companies like Google, eBay, and LowerMyBills have huge valuations (or have been acquired for hundreds of millions of dollars) simply because these companies make money, and lots of it.

Thus when people asked “has the bubble returned” it’s easy to point to these Internet highflyers and conclude that this is not a bubble but rather the emergence of a more mature, legitimate Internet economy.

I think, however, that using Google as the posterchild of Internet legitimacy only tells you half the story. The truth is that there are a lot of real businesses getting attention today, but there are also plenty of questionable business models getting major VC funding and acquisition dollars.

In 1999, the hot verticals were portals, shopping, and web services. Today, the “in crowd” includes search technology, social networking, and affiliate marketing. As in 1999, some start-ups will do very well. These are the companies that combine smart people with experienced technologists, and who try to build for the long-term, instead of the quick IPO.

But the feeding frenzy has begun, and that means that some VCs aren’t learning from the mistakes of seven years ago. Companies are being funded simply because they have something to do with search engines (the next Google!) or because they are a Web 2.0 business (the next!).

A good benchmark to determine bubble mentality is the Ad-Tech exhibitor list. Like Comdex years ago, Ad-Tech has become the show of online marketing. And when you look through the list of over 100 companies, you can’t help but wonder what some of these companies do, and whether they’ll exist 18 months from now. For example, check out the number of companies with the word “Ad” in the name exhibiting at Ad-Tech San Francisco:

  • Ad Pepper
  • AdBrite
  • AdDrive
  • AdDynamix
  • AdFusion
  • AdJuggler
  • AdKnowledge
  • AdMedian
  • Adsertive
  • Adteractive
  • AdValiant
  • Advit

Some of these companies are definitely legit and are going to be around for a while (Adteractive and AdBrite in particular). But there can only be some many successful “Ad” companies, just like the “e” companies of 1999 (eTour? eFax? eBusiness anyone?).

Maybe this is what VCs are supposed to do – invest in a lot of silly companies in the hopes that one out of ten will get acquired for hundreds of millions of dollars. And I have to admit, all this money flowing around the valley is nice. I get a lot more free lunches, free t-shirts, and calls from recruiters promising millions of dollars of pre-IPO stock.

In the long run, however, frenzy always leads to panic. I think it was Jack Trout and Al Ries who said that you never want your product to be a “fad”; rather you want your product to be a “trend.” Dot bombs that blow up a few years from now will only tarnish the overall Internet industry, causing all valuations to drop.

A friend and I once joked about starting a dot com called “”. The concept was simple – people would mail us their shoes (after ordering online, of course), we would fix them and mail them back to them. We had our 30 second elevator pitch ready to go. Everyone in the world wears shoes – that’s 6 billion potential customers. If we only got 1% of this market . . .” And of course we would hire a lot of sharp young Stanford MBAs to add legitimacy to our business, as well as a few consultants to create PowerPoints. We’d raise $20 million, go public for $150 million, and cash out in 18 months to live in Hawaii.

Internet success stories like Google and eBay show that the Internet has matured into a real force in the US economy. But replace “shoe repair” with “Web 2.0,” and it’s clear that there are more than a few bubbles still waiting to pop.