This Tech Bubble Is Different

"The best minds of my generation are thinking about how to make people click ads," says Facebook research scientist Jeff Hammerbacher. "That sucks."

Online ads have been around since the dawn of the Web, but only in recent years have they become the rapturous life dream of Silicon Valley. Arriving on the heels of Facebook have been blockbusters such as the game maker Zynga and coupon peddler Groupon. These companies have engaged in a frenetic, costly war to hire the best executives and engineers they can find. Investors have joined in, throwing money at the Web stars and sending valuations into the stratosphere. Inevitably, copycats have arrived, and investors are pushing and shoving to get in early on that action, too. Once again, 11 years after the dot-com-era peak of the Nasdaq, Silicon Valley is reaching the saturation point with business plans that hinge on crossed fingers as much as anything else. "We are certainly in another bubble," says Matthew Cowan, co-founder of the tech investment firm Bridgescale Partners. "And it's being driven by social media and consumer-oriented applications." There's always someone out there crying bubble, it seems; the trick is figuring out when it's easy money -- and when it's a shell game. Some bubbles actually do some good, even if they don't end happily. This time, the hype centers on more precise ways to sell. So if this tech bubble is about getting shoppers to buy, what's left if and when it pops? "My fear is that Silicon Valley has become more like Hollywood," says Glenn Kelman, chief executive officer of online real estate brokerage Redfin, who has been a software executive for 20 years. "An entertainment-oriented, hit-driven business that doesn't fundamentally increase American competitiveness."