- Associated Press - Saturday, April 9, 2011

SAN FRANCISCO (AP) - A certain feeling is back in San Francisco. Murmurings of stock market riches. Twenty-something entrepreneurs as celebrities. Lamborghinis parked next to taco trucks.

Driven by social media and mobile startups, the money is flowing in the city’s tech industry again, a decade after the dot-com boom minted overnight millionaires and its crash fueled a local recession worse than anything San Francisco has seen in the latest downturn.

A recent tax break for Twitter and other proposals show city officials are hopeful that this latest tech industry prosperity does not portend another bubble and another bust.

“It seems to be the industry that’s leading us out of the recession at the moment,” said Ted Egan, the city’s chief economist. Even so, he said, “it’s certainly not yet another dot-com boom.”

At present, the signs do not point clearly to the same excess of optimism that led to the high perch from which the city had so far to fall. But some of the numbers swirling around the tech startup scene could stir a sense of deja vu.

Along with Twitter, the San Francisco startup causing the most excitement is Zynga, maker of popular Facebook games like “FarmVille” and “CityVille.” Estimates based on recent investments put the valuations of both companies at $7 billion or more.

Yet unlike the first dot-com era, when companies with neither customers nor a clear way to make money raised millions in public stock offerings, both Twitter and Zynga have become major participants in the online economy.

While Twitter is still tweaking its business model and keeps its revenue figures closely held, the company happily claims 175 million users on its way to becoming a global phenomenon.

Zynga’s popularity and approach to money-making are even clearer: It sells virtual goods that players use in the company’s online games. Last year, the company made about $400 million doing just that, according to published reports.

“It seems like they’re doing things that people want rather than what they think they want,” said market researcher Colin Yasukochi of today’s startups versus those a decade ago.

In a study for his employer, commercial real estate firm Jones Lange LaSalle, Yasukochi found that the number of tech jobs in San Francisco is nearing the peak set in 2000, the height of the dot-com boom.

Yet the 32,000 tech workers today are occupying about half the commercial real estate space as their 34,000 counterparts before the crash _ a possible sign that the estimated 500 tech companies in the city are taking a more conservative approach.

During the first dot-com boom, technology companies were committing to large spaces with the intent of filling them with employees well ahead of their needs, Yasukochi said.

“Obviously that growth never materialized,” he said. “That had dire consequences.”

Those consequences included an office vacancy rate that shot from less than 5 percent to 25 percent in two years.

Story Continues →