In November 1999, Advertising Age sounded an alarm about the current ad scene.

The forthcoming Super Bowl was the subject of jokes about which newbie advertisers that had bought up all the ad slots would still be in business to watch their spots run in the big game. Big , expensive campaigns were being unveiled for companies no one had heard of, sometimes before they even launched websites. And those soaring marketing budgets for startups were being managed in no small degree by the venture capitalists pedigreed in the world of valuations, not creative. In cheeky fashion, the reporter on the scene then asked a couple of VCs whether they knew anything about advertising.

"Absolutely nothing," said one, words uttered just months before the dot-com bubble popped, sending a foul wind through the stock markets and retirement plans, and up Madison Avenue.

Eleven years later, the intersection of venture capital and advertising has created another, um, interesting moment. Years of massive investment in ad-supported business, from social networks to casual-gaming companies to mobile platforms to content properties that sell ad space to the lesser-known intermediaries that help filter, target and distribute those ads, has resulted in enormous valuations and now has observers wondering whether we're in a second bubble.

History in mind, I asked Bay Area-based investment banker and consultant Robert Heath to compare those days with our present.

"In the first bubble, an inordinate amount of advertising online, not to mention spending on routers, services and web design-services, was being purchased by startups that had no visible operating cash flow. There were ad budgets being spent out of venture investments and IPO market investments."

He added, "My sense now is that we're not seeing an abundance of pre-cash flow-positive startups buying lots of ads on Facebook and Google. The distribution of advertisers much more fairly reflects the real world."

The relative sanity that might be prevailing, however, doesn't mean we're not in another bubble. The stakes are certainly lower from a societal perspective, given that the risk of irrational exuberance is fairly localized in the investments of a few wealthy people and is not disseminated in 401Ks and the like. But that hasn't prevented the B-word, something most VCs and entrepreneurs loathe to utter in public -- from getting tossed around more and more in recent months, mainly because of the ballooning valuations.

At one end is Facebook, a legitimate game-changer with real revenue, whose January capital influx from Goldman Sachs made it worth $50 billion. At the other is Quora, a kinda, sorta interesting Q&A website, now reported to be worth on paper anywhere between $86 million and $1 billion. In between are any number of companies -- Zynga, LinkedIn, Foursquare. And there is not a little head-scratching that Demand Media's public offering wasn't at all dampened by news that Google, a major traffic referrer, is planning to change its algorithm to punish content farms.

The present and future success of all of these companies and hundreds of others is in no small way reliant on advertising and, when you consider all that advertising needs to provide for them, well, you sort of feel bad for the old girl. It's a big burden. Sure, budgets slashed during the global recession have come back to some degree and there is a will to experiment with new digital plays, but money is still being closely watched and precious few of the new plays have the scale necessary to entice marketers.

If there is a bubble, then advertising is fueling it, but not as it did 11 years ago. Rather than glitzy ad campaigns pumping stock prices, it's the hope of advertising as a source of revenue that is swelling companies' paper worth. Beneath that hope is the perhaps unconscious belief that the largesse of marketers is infinite, an all-too-convenient forgetting that big advertisers are bureaucratic and increasingly austere when it comes to how they spend. They, and their agencies, are not Medicis for the digital era who want to spend their days funding sociology experiments. Far from it. They want eyeballs and engagement of people who might buy their products. And, emboldened by the possibility of building and owning their own content, they don't want to pay media costs to others to get them. There's also some amnesia around the fact that advertising, during harsh economic times, is the first thing to go.

That doesn't mean a new ad-supported business can't make it, just that it will play in an intensely competitive and fragmented environment. There doesn't appear to be a ready figure that tallies up businesses that rely on advertising, but, to get a sense of the clutter, consider a few indicators:

First, on Crunchbase, the company database maintained by the blog TechCrunch, "advertising" is among the most-popular tags. As of last Tuesday, it cataloged 1,372 companies in the ad business, from 10th Degree to Zygella. Compare that to 417 for e-commerce, 192 for health care and 268 for green, each a popular area of venture investment.

Then there's a chart prepared by the investment bank Luma Partners that visualizes the ad-tech environment, plotting the colorful logos of the various companies in their appropriate categories. It looks like a post-sushi-dinner puke. That's not a swipe against the graphic design ability of its creators, but rather a comment on an incredibly complex and crowded scene comprising a chain that begins with the budgetary will to develop an internet ad, through its creation, optimization and distribution, to its delivery to a consumer's retina, to whatever commercial impact it might yield.

Luma promoted the chart with a little Xtranormal animation, which is perhaps even more telling. Starring the website's ubiquitous cuddly characters, the clip satirizes an ad-tech investment pitch, pitting a jargon-spewing entrepreneur who owns the "437th ad network" against an at first incredulous, then later, beaten, investor. Here's the wink-nudge conclusion:

Entrepreneur: "Are you interested in a $75 million pre-money valuation?"

VC: "$75 million? Are you fucking kidding me?"

Entrepreneur: "You are wasting my time. I need to know if you are with me. Fill or kill."

VC: "OK, OK. Put us down for $20 million."

Entrepreneur: "That's my bitch." It's hard to pinpoint exactly when the feeling emerged that we might be in a second bubble. The moment in 2005 when Facebook's valuation hit $100 million is as good a place as any and those worries only continued through the social network's subsequent rounds of fundings, Google's resilient stock price, the rise of Twitter with its own heady valuations and the growth of other social-media-oriented plays.

But six years of speculation, in all senses of the word, has yielded no firm consensus. While more and more observers, especially in the business press, are seeing bubble-like symptoms, the people actually doing the investing are split. Whether you see a bubble depends on two main factors: whether you're from the East Coast or the West and whether you're talking about early-stage investing or later stages.

What is abundantly clear is that the current scene shares none of the dopiness of the late 1990s. Some of those valuations may strain credulity, but this is not a Ponzi-scheme environment. Nor is there the cultural excess associated with high-flying dot-com flameouts.

All the excitement, too, is based on a more-sophisticated notion of "advertising." It's become standard to pair an ad model with something sold direct to consumer, such as virtual goods. Smarter enterprises are looking beyond paid media to focus on consumer data, which, as one investor put it to me, "has become an advertising problem."

In November 2008, Mike Hirshland, a general partner at Polaris Ventures, published on his personal blog a short but sharply worded entry titled "The Problem with the Ad-Supported Startup Model." The post's central observation is that many entrepreneurs suffer from the mistaken notion that building an ad-based business is easy work. There is, he wrote, a "perception amongst web entrepreneurs that you can just slap an advertising model on top of a web property, sprinkle water, and have a real business, has led many to spend much less time and energy thinking about how to make money."

Over three years after his post, I asked Mr. Hirshland whether his feelings had at all changed. In a nuanced answer, he noted that he sees fewer ad-only models with freemium offering becoming more and more popular.

"I think what people did realize is that in order to succeed, you need massive scale," he said. "We've seen a number of companies grow massive scale, and I think you have a generation of folks in Silicon Valley who are having huge impact on the advertising space. They have scale and they're really smart. Technology and data models are really starting to have substantial impact in the advertising industry."

The scale question -- and, just to be clear, his idea of scale includes massive sites like Facebook and Twitter and a handful of ad networks -- is central to getting Mr. Hirshland interested in a new investment. He needs to see a clear indicator of the potential there. One of his seed investments is Formspring, which he said went from zero to 40 millions users in four or so months.

"That's extraordinary growth. In an ad-supported business model, we're looking for things like that. And they are few and far between."

One angel investor who looks at a lot of advertising-related deals was much more critical of what's going on at the early stages.

"It's been remarkable," he said. "I've sat down with any number of investors over the past 12 months. What I found by and large is that they've invested in all these companies and have absolutely no idea how to monetize."

They come up short, he said, in identifying specific ways to make money and offered, as an example, a potential investment that's focused on consumer data. Investors will understand that consumer data is much in demand but have no idea how to monetize it.

"They're writing these huge checks to companies with certain expectations and they think they know what the revenue is going to look like, but they don't know anything about online advertising."

Then there's the issue of communication. Jon Steinberg, a veteran of Polaris and Google and now the president of Buzzfeed, a 3-year-old viral-media company, said there needs to be more of an effort to educate entrepreneurs and VCs on what ad agencies demand. Some of this is as simple as helping publishers understand the media agency landscape or navigating an insertion order or an RFP schedule.

"I meet a lot of entrepreneurs who expect part of their revenue model to come from big brands. VCs talk to them about it, but I don't think there's as tight a community between the tech side and the ad agency side as there should be. It all needs to gel together." If you look long enough at the sheer amount of competition for ad dollars, it's difficult not to wonder whether one day there just won't be enough to go around. Forecasters will tell you that ad spending is coming back hard, following a miserable few years. And digital is the fastest grower.

"I'm a bull on online advertising," said Mr. Steinberg. "There are many dollars coming out of print, radio and TV, even though you can argue TV is hot again. The shift of ad budgets online vs. time spent online is still lagging. Massive amounts of dollars will come out of traditional media."

That lag Mr. Steinberg is referring to is part of a famous slideshow by Morgan Stanley analyst Mary Meeker that's been featured in many a startup's investor deck. Its most recent version finds that the internet soaks up 28% of people's time, but commands only 13% of budgets. Ms. Meeker sees in that disparity a $50 billion opportunity, the sum that can be filched from TV, which has 39% of spending with 31% of time spent and, especially, that bleeding animal, print (12% and 26%).

This is a view from outer space on online advertising, vague and without detail. Comparing media channels is a bit apples to oranges, and fails to take into account differences in the supply-and-demand dynamics of each. TV, for instance, benefits from offering true mass events, such as the Super Bowl and "American Idol." The internet suffers from a near-infinite supply of inventory. In the best interpretations, it's a reminder that digital still has growing to do. In the worst, it leads, as anyone who's seen a particularly preposterous ad startup pitch, to a fatally-flawed syllogism: Because digital has so much growing to do, all digital is viable.

There is, however, a common-sense problem that arises with digital marketing, which in theory at least is somewhat doomed by its own effectiveness. Increasingly sophisticated targeting tools could actually entail less spend, not more.

"You can imagine a world where the efficiency of online advertising does indeed reduce the overall demand for ad spending," said Mr. Heath. "If you can achieve your ends with a sniper's rifle rather than with a blunderbuss, you could save on a lot of bullets."

Last week, Michael Scissons' Syncapse, which manages and measures the social-media presence of companies such as Research in Motion and Electronic Arts, announced that it had raised $25 million in funding. In the weeks before, I had spoken with Mr. Scissons about the current VC-ad scene and whether the valuations or the clutter had given him any concern. Mr. Scissons, a Canadian entrepreneur who recently set up shop in New York, pretty much shrugged at the question.

"Some of our fastest-growing years were during the height of the recession. We had customers who had $30 million budgets cut to $3 or $5 million and were looking for alternative ways to spend money. They got creative and that creativity marked an acceleration toward efficiencies that we in social media provide."

As a result of that experience, he is very bullish on the next two to three years. He does, however, caution companies who think they can get by on old-school notions of advertising effectiveness alone.

"For them to be sustainable and to get the exit they want, they need to do one of two things," he said. "They need to make their customers money or they need to save their customers money. I see a lot of ideas where you have a hard time understanding how they'll do this. The answer is brand awareness. But what is that, and why do I care?"