MySpace co-founder sees killer deals for established players that can purchase cash-strapped startups

Not long ago, the sentiment of Web 2.0 startup founders was fairly consistent. Basically, the IPO market would come back; the online advertising market would continue to grow; and valuations would continue to escalate.

Well, it looks like things have not gone according to plan. If anything, it looks like we are seeing the return of the dot-com implosion.

However, this can be a good thing for the established players, such as News Corp's (NYSE: NWS) MySpace. In fact, at Reuters Media Summit, the co-founder of that site, Chris DeWolfe, mentioned that he is seeing companies offered at steep discounts. Price tags are a "small, small" fraction of what they were just six months ago, he says.

With dicey business models and dwindling venture capital, the cash positions of many Web 2.0 players is dwindling, putting even more pressure on valuations. Hey, just look at the rash of layoffs over the past few months.

So, where might MySpace look for deals? Apparently, there is interest in global markets. MySpace also wants to bulk up its music offerings.

DeWolfe is relatively optimistic about the expectations for MySpace for the next year. While growth is likely to tail off, things still remain intact – especially if MySpace can pick up some properties at compelling valuations.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.