Many of the sites and businesses in the first bubble did at least work; I don't think that was the main problem. They just weren't able to make money. To pick two notorious examples: WebVan really did deliver groceries, and the customer experience was fairly popular; and GeoCities was a reasonably well run site that fostered a lot of user-generated content. But WebVan couldn't pay for its operations and scaled up way too fast, and GeoCities, while it would've been a good idea at a lower valuation, wasn't worth the $3.5 billion that Yahoo paid for it.
Ah yes, but with better management both could still be in business.
Or in other words, Starbucks could also have been mismanaged.
And http://www.peapod.com/ is still in businesses.
As others in this thread have pointed out, the key distinction between bubble 1.0 and 2.0 is complete nonsense vs. real value.
Most likely currently hugely overvalued value, but still real value.
After bubble 1.0 burst, it hurt the very concept of business on the internet badly.
When 2.0 bursts, a very few companies will close shop, the rest will simply be worth a lot less and lay off people but will return to operating profitably as before.
