Today Mark Simon of Did-it raised another bubble alarm in his post “Is The Online Ad Industry Partying Like It’s 1999?”

Unlike stock analyst Henry Blodget, Mark is a search industry insider who is highly respected within the online marketing industry.  So, when he rang the bubble alarm it certainly raised my eyebrows.

On a few of Mark’s points, I couldn’t agree more, namely:

• No Google product outside of search has produced meaningful revenue.  I would add that some products (e.g. YouTube) have also produced meaningful cost in server load and significant legal risk.
• The expectations placed on Google by the public markets may be unreasonable.  They’ve yet to have their “gut check” period where many things start to go badly at once. 

Here’s where I respectfully disagree with Mark.  He writes of a doomsday scenario where:

“The result is panic selling of Google, which casts a pall over the entire online ad business, restoring some measure of rationality to stock valuations. Keyword prices crash, as marketers, responding to a new wave of investigative articles about the effectiveness of search advertising, reign in their budgets.” (emphasis mine)

That’s where Mark loses me.  And here’s why.  Lately I’ve been making 2 points to anybody who will listen:

1. Search is extremely valuable for direct marketers, in fact it is far more valuable than any other channel they have, offline or on.
2. This time, unlike in 1999, big advertisers with huge budgets understand that.

So when I write that social media will be tough to monetize or that the search marketing is the last piece of budget advertisers will cut that’s where the issues tie together. 

If you have a web 2.0 start-up with a crazy name, no revenue model, and are just hoping to bought out, I think it may be time to start worrying. 

But search CPCs aren’t coming down anytime soon.