San Francisco - The Web 2.0 investment boom may be peaking, according to a new report from Dow Jones VentureSource. While venture capitalists pumped a record $1.34 billion into 178 Web 2.0 deals in the U.S. last year -- up nearly 88% from 2006 -- social network Facebook accounted for 22% of that funding.

Deal flow also slowed, increasing just 25% after doubling each year from 2002-2006, and nearly all of this growth happened outside the Bay Area, the longtime home of Web-related innovation and investment.

"On the surface, the numbers look fine for the Bay Area... but take Facebook's $300 million out of the statistics and you see a very different picture," said Jessica Canning, the director of global research for Dow Jones VentureSource.

"Web 2.0 deals in the Bay Area actually dropped from 74 deals in 2006 to 69 last year and investments were down 3% from the $431 million invested in 2006. It's clear that the real growth in the Web 2.0 sector is happening outside of the Bay Area."

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