First, Anderson argues that social networking should be a feature, not a destination. I agree wholeheartedly. The ability to interact with friends, share content, and engage in self-expression should be standard features on most websites. The unique methods of encouraging creative online behaviors known as Web 2.0 will filter through the rest of the Internet and, soon, your grandfather’s favorite website will allow him to engage in “social networking.”

Second, Anderson cites stats regarding advertising revenues or costs from Myspace (NWS-A), Facebook, and Ning. He shows that monolithic social networks like Myspace and Facebook, which attempt to be all things to all people, are having immense struggles with selling advertising at worthwhile rates. He also implies that Ning’s niche vertical social networks built by customers command higher advertising rates. Some marketers happily pay the higher rates because the engagement level is greater on these niche vertical networks. Advertisers also prefer the more intelligent targeting of relevant audiences. Myspace, Facebook, Bebo (TWX), and other undifferentiated mass networks are actively trying to improve their targeting abilities so it will be interesting to watch this competition evolve.

Finally, Anderson asks a pointed question about Facebook’s implied $15 billion valuation when Microsoft (MSFT) bought a small percentage of the company a few months ago. If Facebook is struggling to target its advertising and improve its advertising revenues, does its gargantuan valuation make sense? I think Zuckerberg should take the money and run. I also think that Lee Lorenzen, a venture capitalist, and his prediction that Facebook is worth $100 billion is a case of shrewd exaggeration. What I think is most funny is the fact that all of Lorenzen’s fanboys, the self-branded “social app gurus” and developers of tiny Facebook apps are all eagerly drinking the spiked punch. There are few better examples of confirmation bias in action.

My main problem with Anderson’s analysis is his implied assumption that the currently high advertising rates the niche vertical social networks enjoy will stay relatively high. Based on his personal experience, he concludes that Ning’s advertising rates are greater than Facebook’s and Myspace by at least a factor of ten. I don’t think this will last. Web 2.0 methods are precisely that, methods. They can be products, but they are also methods or general, conceptual best practices. As such, the ability to create robust social networks for different verticals will diffuse to a critical mass of software engineers. As that process accelerates, social networks and features of social networking will become commonplace or commoditized. I’ve alluded to the commoditization of social networking applications, which is a related problem. When this process nears its peak, advertising rates for all social networks will have diminished drastically. Self-proclaimed “social app gurus” and “social network gurus” who have staked their futures on social networking will ultimately prove themselves as less than prudent.

Another report by the National Venture Capital Association found that only five venture-backed startups achieved an IPO in Q1 2008. We’ve never seen levels this low since the bottom of the bear market in Q2 2003. A public market with a healthy appetite for new issues is essential for the venture capital industry. It drives the lucrative exits that VCs are looking for and also, in a roundabout way, cycles money back into venture fund coffers for the next generation of startups. In a market wary of IPOs, the only remaining exit opportunity is acquisition by strategic buyers.

We know that VCs are frustratingly lemming-like in behavior. As with all investment activities and fields, it is much safer to follow the crowd or herd than to venture out, pardon the pun. But as with all investment activities and fields, it is much more profitable to invest with a contrarian framework.

Bull market vintage funds usually pay top dollar in terms of valuations. It is notoriously difficult to time the markets, but a good or lucky venture fund could exit handsomely on a few investments while valuations are still rising. However, most investments will have been made at the most expensive valuations. This is not usually a recipe for success.

Bear market vintage funds usually buy equity in startups at favorable valuations. It is still notoriously difficult to time the markets, but the depressed valuations paid by venture funds make it more likely their exits will be profitable. Investments made now while we are in a bear market will take several years to harvest. When portfolio companies are ripe, if history is any guide, the markets will have turned for the better and exit opportunities will abound.

What would I do if I wore the shiny shoes of a VC? As I said before, I would resolutely shun the second-tier ideas that are social networking apps built by self-styled “social networking gurus” or “social app gurus” because these toy ventures will never achieve noticeable success. If I had to play in the Web 2.0 playground, I would concentrate on “primary platforms” that will compete directly against existing social networks like Myspace (NWS-A) and Facebook in a unique way. I’m sure there are entrepreneurs frantically trying to figure out different ways to address the social networking space. I would not fund any social networking apps that would need to exist within Myspace, Facebook, OpenSocial (GOOG), or other platform ecosystems. In the big picture, the cost to build a primary platform versus a secondary web application, or even networks of secondary web applications, differs little. The reduced cost of building consumer Web 2.0 businesses means perhaps we should be allocating less capital to this space anyway.

Of course, not everything is Web 2.0 – let’s not be myopic here. Enterprise 2.0 looks promising as it actually has a potential revenue model around it. I’m crossing my fingers that the clean tech guys will launch something truly revolutionary and world-changing. The already significant attention given to that space by VCs will pale in comparison to the resultant capital flooding to clean tech if some genius scores a big hit.

What would I do if I wore the worn-out sneakers of an entrepreneur? I would try and do what Marc Andreessen did with Ning and raise more money than I need to weather the coming slowdown. Giving up a bit more equity in this environment makes sense in order to ensure that my startup makes it through alive. This is exactly what I’m trying to do with my new stealth mode startup. Now I’m no Andreessen and my deal is so new, but I’ll just have to keep pitching to see how far we get.