When Wall Street Journal writes about something new, it is time for everyone to take note and pay attention.

Perhaps this is a very symbolic coincidence that the Journal came out with two articles looking at the two sides of one issue: "Social Networking Comes to Health Care", by Laura Landro and "Is 'Web 2.0' Another Bubble?" by Online Journal's editors giving forum to two VCs.

Why should you care and look at these two pieces together?

First to get it out of the way, yours truly is mentioned in the first one, along with HealthTrain Manifesto, Healthcare Blogging Summit and upcoming Trusted.MD. But that is not why I am posting :)

The first article is about an emerging beginning and the second is about a coming end. I will not add anything here about the beginning, as I have been beating the drum of healthcare transformation through open media for so long. That's why this site was started.

I will talk about Web 2.0 bubble and what it means for healthcare

Remember dot-com bubble? A new technology called the Internet emerged with lots of promise. New companies were created and a few are still standing (Yahoo, eBay, Amazon). Yet, even more wanted to get in on the Gold Rush. Thousands of them failed. John Doerr of the venerable Kleiner Perkins called Internet "the world's biggest legal engine of wealth creation". Soon he had to add "and destruction".

Healthcare applications emerged very early in the first Internet boom. Medscape was founded in 1995. Healtheon, WebMD and drugstore.com were fast followers. The shakeout was brutal. Now we have WebMD and everyone else. Many in healthcare technology business still bear the scars and shudder at the thought of the last shakehout.

Now the madness is about to repeat itself, with a few differences

The so-called "Web 2.0" term was coined by Tim O'Reilly to sell his conference on the rebirth of the Internet. As a fellow conference organizer, I tip my hat off to Tim. Marketing well done. However, the byproduct has been creation of the hype wave as bad as dotcoms'. Mark my words, Web 2.0 will ring like dotcom very soon.

Now the debate is starting about Web 2.0 bubble and when and how it will pop. Dave Winer, the great-granddaddy of blogging opined it will begin with the crash of Google stock ("Bubble Burst 2.0"), that will send the tourists packing. Now WSJ is weighing in too:

Web 2.0 is a bubble for 3 reasons: 1) There is far too much money chasing Web 2.0 deals. Too much money means too many companies getting funded at higher valuations. 2) There are virtually no barriers to entry in Web 2.0 and therefore the ability to develop a unique solution and sustain a competitive advantage is virtually nil. Therefore, it's difficult for Web 2.0 companies to build long term value. 3) There is very little liquidity in the market for Web 2.0 companies. The Dow was recently at a high and still no liquidity. Without liquidity, Web 2.0 companies must rely on acquisitions to achieve liquidity and this will put a lid on the potential exit options and ultimate valuations of these companies. In short, they will be playing a musical chairs game in which there are far too many players and too few chairs.

The last sentence seems to come from the Internet 1.0 era. Few chairs there were indeed and only a handful of players grabbed them.

Now back to healthcare and the so-called "Health 2.0"

If you compare the first and the second boom and bust cycle, in the second one healthcare is lagging. Every business that has ever been tagged by "Health 2.0" label is still in diapers in terms of proving the model. Yet the bigger space "Web 2.0" is about to implode. Look for intangible indicators and note the Top 10 words of the year.

What this means for healthcare? Web 2.0 bubble pop will discredit anyone called Health 2.0. And since the "health social media" is so new this could have a real chilling effect on the legitimate applications and businesses. Pure hypesters are doomed anyways.

What is the silver lining in all this doom-and-gloom?

As a transformative force, blogs and social media are here to stay in healthcare. People will express themselves online and break down the institutional barriers. But anyone who says they will be "next WebMD" just because of "Web 2.0" is full of it. Look for real proof and traction to separate winners from losers. To quote WSJ:

Aha! We agree on what may be the most important point -- great entrepreneurs are the key to building valuable companies. If you invest in great people, you have a good chance of making money. In the current market there are gifted entrepreneurs that will benefit and thrive. These people will start disruptive companies that look for what will be hot rather than what is hot. They won't be lumped into the Web 2.0 category; they will define their own categories. This is what will separate the few winners from the many losers. So in closing, I am leery of Web 2.0 but I am always going to invest in great people pursuing big ideas.

Bottom line: The history will repeat itself. There will be big winners and big losers. Soon I will post on how to tell them apart.

UPDATE: A really interesting debate on "Health 2.0" at THCB.