Well, in market economics, 'perfect competition' is usually considered a good thing. It allows for maximum innovation and and the maximum alleviation of 'scarcity.'

I think the problem is that so long as this new wave of entrepreneurship is limited to web-startups, we're going to see diminishing returns. There are only so many ideas that can reshape the way we do communicate and do business while remaining within the confines of a webapp. Future startups will presumably have to chase smaller and more niche problems in order to remain relevant.