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The Myth, Reality & Future of Web 2.0

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This week’s hot meme has many of the thought leaders, investors and pundits doing a bit of hand wringing about the whole Web 2.0 thing. Some have called for a sanity check, and others called it a bubblet.

The discussion flared up when Josh Kopelman, a well known angel investor, wrote that many of the Web 2.0 companies that were cropping up were targeting a niche audience. He found that many were me-too or forgettable permutations of some of the more established players such as Flickr, You Tube or Digg.

The Myth of Web 2.0 is the investment opportunities. The reality of Web 2.0 is too little original thinking. Web 2.0, simply put, is a set of technologies and a new kind of thinking, which companies like Yahoo, Google, Microsoft and AOL are incorporating in their products. That’s the reality and the future of Web 2.0. Looking out further, Web 2.0 technologies could and should make an impact in the Enterprise, that boring place we call work! (Full post, after the fold)

A few months ago, I argued about the scalablity problems beyond 300,000 users and how companies have to start spending the big dollars on building out the infrastructure. The response to that post was almost bi-partisian: the readers who were from the network builder camp agreed with what I was trying to say, while others simply could not buy into the scalability as a problem theory.

The 53651 Meme

Meme of the week, however, explains why the second camp did not care much for the scale as yet. Josh Kopelman pointed out that many of the so called Web 2.0 products were catering to a highly skewed audience, the one that cares about all-things Web 2.0. “Too many companies are targeting an audience of 53,651.  That’s how many people subscribe to Michael Arrington’s TechCrunch blog feed.” he wrote.

My theory on this goes something like this: “The boom here is about people starting companies, getting funded. Where’s the opportunity for second-hand participants? None of these companies are making money, or going public anytime soon.”

Paul Kedrosky is right when he writes, “a just-launched service gets to wander around telling people that it already has, say, 12,000 people trying the product when the reality is that it is the same fickle folks who try and discard everything.” Brad Feld says that first 25,000 users don’t mean anything.

Dave Winer takes a different perspective, and says, that the number of users matter (or don’t) but it all really depends on what your motivations are: someone who simply champions innovations or someone who invests in the Web 2.0 start-ups. Jeff Nolan sums it up succinctly when he says that none of these things really matter to the people who got money to spend – the enterprise buyers.

I don’t mind living in the echo chamber, and I certainly wouldn’t suggest that we get off the hype train or suddenly strive to become boring like so many other industries, but I would caution to not drink the proverbial kool-aid to the degree that we have in the bubblet that we seem to be in for the last year.

Mainstream & Web 2.0: Don’t Know, Don’t Care

At Paul Graham’s Start-Up School, when I asked people about Netvibes and Tech.Meme well, not many people were aware of them. (Niall thinks it has to do with my accent, that people did not hear clearly and thus did not raise their hands. Quite possible!) More recently, when in New York, even my more tech-savvy pals were unaware of this whole Web 2.0 thing, though most read weblogs (in html format) and listened to podcasts. A few weeks ago, I had a conversation with Michael Eisenberg, a big shot VC in Israel (and a general partner at Benchmark Capital.) He said, that Web 2.0 might just be a Silicon Valley thing, and was quick to point out the differences between the Web 2.0 and consumer Internet start-ups (such as You Tube.)

The way I see it, there is a lot of commonality in Indian food and Web 2.0. Even as early as 1990s, Indian food was not familiar to the American palette. It took a long time before people got used to the earthy aromas and spices. But once they did, the Indian restaurants blossomed in America. But even now I don’t think people are adventurous enough to try anything other than Chicken Tikka Masala and/or Daal (Lentils) with rice.

It is the same thing with Web 2.0 technologies. Yahoo and AOL, two companies who know the mainstream consumer are introducing the Web 2.0 in “Tikka” sized chunks to the mainstreet. AOL AIMPages is a good example. So is My.Yahoo. There is enough RSS/Ajax/whatever that the mainstream consumer can handle. Google, which makes a heavy use of Web 2.0 technologies, in offerings such as GMail, but the mainstream users are not sweating the details. Microsoft’s Live offerings, though still popular with early adopters, are going to help spread the Web 2.0 philosophies in a manner the mainstream users can handle.. (Read: What do Microsoft and Macy’s have in common?)

The Web 2.0 pioneers who created some fantastic new apps are like those star designers. They created the template of what’s cool. A few months later, just like Macy’s Microsoft learnt the new babble. Microsoft Office Live, is the watered down version of Web 2.0, wrapped in a business model for folks who don’t know and frankly don’t care about Ajax or whatever that goes into the cauldron.

Web 2.0 Enterprise

While many are focusing on the chasm (as PK calls it) between the early adopters and mainstream consumers, I have a slightly different view on all this. I think the Web 2.0 Web 2.0 philosophies (and related technologies) are going to have the maximum impact in the enterprise.

I have argued about this in public forums, and private chats with many within the industry. A faster, better more nimble front end cobbled together for a corporate application such as PeopleSoft. The nimbleness of some of the Web 2.0 applications is a perfect match for software on demand or SOA or whatever they are calling it this week.

The Web 2.0 apps leverage cheap hardware, open standards and availability of plentiful bandwidth. Inside the firewall, bandwidth is many times what we have on the public Internet. Cheap hardware and open standards are pretty much a given in any enterprise. But more importantly, the size of the audience is predetermined, and the operating environment is more controlled. This eliminates some of the issues of scale and scalability associated with consumer-facing applications.

And frankly, most enterprise applications could use a serious makeover. I cringe every time I have to use one of the many apps you have to touch as an employee of a large company.
A more indepth discussion on this can be read on Peter Rip’s blog, where he writes, “Web 2.0 is a lighter weight version of SOA. RSS/REST is the new EAI.” Dion Hinchcliffe, makes a very compelling and coherent argument in favor of what Rip is saying.

SOA is both the “Mini-Me” of Web 2.0 (identical in almost every way but 1/8 its size) and a key archetype for it as well. Though admittedly one that lacks a few important ingredients. What is compelling, and I’ll talk about this in detail in future articles, is that Web 2.0 actually has powerful mechanisms that “complete” SOA..

55 Responses to “The Myth, Reality & Future of Web 2.0”

  1. optifex

    So a disparate group developers and designers are coordinating their efforts to move the marketplace in a favorable direction. It is a tactic used frequently by indepedent creative professionals; see Art & Writing Movements, Schools of Philosophical Thought, Music Scenes. I find it expotentially less-offensive than culturally-accepted business promotion (i.e. putting signs up everywhere, the Commercial).

    So let’s all just let them innovate in peace, all right?

  2. I think we may see some fluff in the start up of new Web 2.0 companies but not like the dot com days. One of the reasons is low start up costs. Building a Web 2.0 site doesn’t require a huge budget and you are able to see and grow more efficently.

  3. Om:
    I agree that enterprise is where the maximum impact of Web 2.0 technoloiges will happen. That is the premise behind Zoho – SMB and enterprise focused applications using Web 2.0 technologies.

    We already see a sharp dichotomy between consumer focused applications and enterprise applications in Web 2.0, though there are some points of intersection, like Google Maps being used in a CRM application as well as in a social event planning application.


  4. I’ve spent a lot of time doing consulting for enterprise IT. My opinion is that the “web 2.0” opportunity in the enterprise really has little to do with AJAX and Flash UIs (although a lot of enterprise apps could use some of that). Its more to do with the fact that as many people are pointing out most enterprise applications are built as ways for management to enforce compliance and control employees (top down).

    A “web 2.0” enterprise play would do the opposite, empower people to connect within and across company boundaries in ways that builds value for the firm and its customers (bottom up). I guess some of the wiki stuff might fit here. Another area ripe for this kind of fresh take
    is probably salesforce applications.

    But the real problem is that the enterprise software startup faces huge cost of sales and skepticism. Adoption is very slow even if budgets are large. Open source and ASP business models are probably the only way around this (other than raising a ton of money =).

  5. skibare,

    I highly doubt YouTube will go publice. They are burning through venture capital like no tomorrow, and haven’t broken even. I’ve heard that they use something like 50TB of bandwidth PER DAY (1TB = 1,000GB). They burn through about $12M per year, while making nothing.

    I’m going to have to call YouTube out and say that it won’t last any longer than 12 months, unless another VC hands them more cash. Not only that, but with piracy and copyright issues, I think YouTube might be too much of a liability for a company to pick up / M&A. I could be wrong…

  6. Geez.. I feel like I’m a web2.0 illiterate after having read this post.
    Quite a few slippery & nebulous concepts related to Web2.0 (including web2.0) that I’m having a hard time understanding.

    But being an avid reader, one thing that strikes clear to me is that (as Ben points out), Web2.0 signifies new(renewed) energy that can now be seen even in places far away from the Silicon Valley. Web1.0, I think used to be Silicon Valley (US) centric but Web2.0 is not so.

    Web2.0 is all about new opportunities.


  7. Clearly, history is just one bloody thing after another, and mostly the same things in the same sequence.

    Web 2.0 is hot!
    Web 2.0 is the Next. Big. Thing.â„¢
    Web 2.0 is going to take over the world!
    Web 2.0 is over-hyped.
    Web 2.0 is nothing but warmed-over old technologies.
    Web 2.0 is the same old big companies doing big things for big clients.

    Ummm … haven’t we heard this already? Haven’t we been here before? Isn’t this exactly the cycle we went through with the internet, errr, web 1.0 boom a few years ago?

    Here’s the simple problem:

    Everyone over-estimates change in the short term and under-estimates change in the long term.

    So we’re all jazzed about the New New Thingâ„¢ every couple of years, then deeply disappointed six months into the New New Thingâ„¢ when, sadly, it hasn’t solved world peace, provided food for all the hungry, and made Michael Jackson’s face look normal.

    Time, my friends, heals all.

    Web 2.0 is simply an extension, growth, enhancing of the people-first, user-centric, democratizing internet that we all went to the prom with a decade ago.

    It is cool, it is different in degree, it is creating new business models, it is allowing small smart start-ups to compete, and it is not just for big business (as if that’s the standard by which all important technology is judged anyways).

    But it’s not a silver bullet, it won’t let us get to the moon overnight, it won’t make more than 50 or 60 people “overnight” millionaires, and it won’t render the internal combustion engine obsolete.

    It’s an opportunity … and opportunities, as you know, often come very well-disguised as hard work.

    So let’s not expect instant miracles: let’s roll up our sleeves, use the new tools, and make some cool stuff.

  8. Somewhere right now, a middle-manager at a large enterprise company is complaining about a programmer underling because he added Ajax to an internal corporate webapp, instead of working on something else the manager wanted.

  9. I think there is a twist to what “web 2.0” really means, and what some folks think it means, and what it will come to mean.

    To me, web 2.0 is a technical term, used to describe the new tide of web innovations, mainly around UI, usability, features, etc.

    But I think there is a greater interpretation of web 2.0 – in that it also defines the new Internet. By this I mean, clearly there is a new energy on the Internet and around Internet startups. Whether or not these businesses are using web 2.0 technology, they are in a sense helping build the 2nd version of the Internet, as consumers have come to understand it. I tend to think that the term “web 2.0” is better used in this way.

    i love your description of the first x users – and I couldnt agree more. Also known as low hanging fruit, these users are virtually meaningless.

  10. Enterprise software market as it stands is dead. Why bother writing for Fortune 500. Every sale is a year long, every implementation is a custom implementation. Software startups can’t do business this way. Enterprise buyers are slowly killing the hand that feeds, if Fortune 500 companies wants latest innovations from software startups, there needs tobe behavioral change from enterprises buyers. If not you will get maintenance software vendors providing such innovation solutions as ABAP, CICS, etc.

    Jeff Nolan should put all his effort in helping AS/400 market place if he wants, but for Web 2.0 software startups who want to get into business application market follow model. Smaller direct sales force and heavy on online business model and no custom implementations. Let buyers try it for 30 days for free.

  11. Based on my experience, enterprise apps are about 3 to 5 years behind on adopting new tech. Internet1.0 or Web2.0, what ever you name it. Because of the obvious development cycles, customer installed base issues, data issues and the critical data which powers these apps and the need to protect ones own products/market. In very gernalised term, a BMW would like to sell the entire inventory of 2006 before they can start selling 2007 models.

    About Outlook web access, why should MS compete on the level playing field of web, when they own the desktop ? They will play to their turf as long as its profitable. MS could have done web only outlook long back, but then they expose themselves to competition. So its more strategic move rather than reluctance to adopt a technology. They will wait and watch the success of SOA or hosted application space, before moving over to it and dominating it.

  12. I am a medical librarian. I love Web 2.0 and all that is related to it because I am constantly finding neat, free tools (e.g., programs to transform Word documents into PDFs or web pages into PDFs) and RSS feeds and email alerts and new search engines. These tools all make me far more productive in clerical tasks than I would otherwise be. I love Blummy, for instance and R Mail and FeedYes and our library recently began burning podcasts onto CDs for checkout to the ICU.

    The trouble is that is hard for Microsoft-oriented IS departments to grasp how incredibly useful the wide variety of Web 2.0 can be and I find that there is a huge public education task ahead about RSS feeds for users in healthcare.

    Take the medical publishing behemoth Elsevier, for instance. Talk about lousy marketing and being behind the curve on RSS and email alerts. They offer email alerts, but they don’t work very well. And try to find RSS on their sites! Same goes for most of the medical publishers. What a pain! Do they need some smart Web 2.0 honchos or what!? I would love to clone Marshall Kirkpatrick:

    and send out a legion of those clones to address the boards of trustees of every hospital in America and give them a presentation on Web 2.0 in the corporate workplace. A day with Marshall and there would a huge boost in productivity in healthcare and in the sector’s general knowledge of recent developments in research (via RSS feeds). I saw Marshall show a single doctor how to harness the power of Web 2.0 so as to keep up on the literature and how to participate in the blogosphere as a researcher. It was phenomenal.

    If only we could “degeek” (to use Steve Rubel’s phrase) these technologies. They could massively up office productivity. As it is, I just quietly and anonymously accumulate an arsenal of these tools. But I have to do so by spending hour after hour outside of work reading Web 2.0 blogs, learning about Web 2.0 tools and trying them at home because and not at work because of firewall issues. It is so weird to want to take to most of my work home so that I can do it way more quickly and efficiently than I can at my workplace proper.

    I agree that there is way too much emphasis on the Facebook sort of stuff. The really important developments are the scores of little tools that get so little fanfare that one reads about at Library Stuff:

    or at Marshall’s blog.

    Micropersuasion, of course, is must reading:


    is very useful.

    TechCrunch is useful for alerts about new tools.

    I wish there were a blog that was dedicated to highlighting just the nifty little office productivity tools (search engines, widgets) without any hardware stuff or the self-infatuated rah-rah of Library 2.0 and the insider tedium of John Batelle’s stuff. Just the software tools, man, in simple language. Show us non-geeks how to use OPML, for instance, and we are yours for life.

    And where are the women on this subject. Helllllooo, gals–where are you? Get in the game–sheesh! Emily Chang:

    seems to be it save for the softer social theorist types and the Library 2.0 cheerladies.


  13. I feel the early movers have already “moved” in Web 2.0 (namely, flickr, YouTube, digg, a few others) and the space is already getting cluttered. The same thing happened Web 1.0: too many websites competing for too few resources. There’s a limit to how many websites I personally can claim to use daily, probably no more than 5-10. It just simply gets out of hand. Another big problem is I find I simply can’t remember the names of many of these sites, because they’re choosing such user-unfriendly names. I remember the names “meebo” and “etsy” but I can’t remember what they do.

  14. venkatesh

    i agree, so far the enterprise apps have been not very user friendly, and just because they haven’t been, doesn’t mean they shouldn’t.

    Ajax etc only help making the experience better, UI faster, and well its not stupendously expensive. I think as they continue their transition toward the networked-computing, and managed everything paradigm, the web 2.0 technologies are only going to come in handy.

    look at zimbra: its what outlook/exchange should have done, a long time ago. but they haven’t. so zimbra is working – as a user, i find it so much more pleasant than using outlook web access etc.

  15. Well OM, enterprise software are not limited to single screen websites like gmail or calendar which took like 2 years to be released. Think of enterprise applications as one having hundreds of gmails like screens. The business process involved requires hundreds of screens. My experience has been, business owners don’t give a rat’s ass about having a AJAXy UI as long as it is simple, easy and supports their business. My experience with Oracle and clients using Oracle, show that users are more concerned about how the application supports their business process and how well it integrates, rather than if it uses AJAX or web2.0.

    Most Web2.0 companies are building what would be called simple and non critical “features” in Enterprise world.

  16. Who care if you’re targetting 53,651 users? If you can get them to pay $1/month, that’s over $5M/year, which sustain a decent infrastructure and a few programmers quite nicely. That’s the key element to Web 2.0 in my opinion – the power of the few (both in the sense of the coders it takes to make an app, and the number of customers it needs to make it successful)

  17. There has been a lot of talks about Web 2.0 for the past few months. However, no one has specifically distinguished the difference between the current standard and Web 2.0. Furthermore, no explicit demonstration has been shown regarding the supposedly new standard of Web 2.0 as well.

  18. Om — on the lighter side, you can’t seem to spell the guy’s name the same way twice — It’s “Kopelman.”

    More importantly, Vinnie is the one who’s talking sense here. In AJAX, the “J” is the pretty stuff to do when there’s time to fight for market share in mature segments — like webmail. The real innovation is in the “X” where the development and operating cost of many applications can be lowered by the requisite order of magnitude required to get users and companies to actually change behavior.

  19. Om , I completely agree with you on this one. I must say although I like many of the applications that some of these web2.0 companies are building, they are going to fade away soon. In fact I already sense the beginning of this fade. Yes, most of them are marketing for the beta-audience and the business model is to get funded and then aquired by the big-ones – hardly sustainable in the long run.

    I even have to admitt that I check my Techrunch feed less and less – its just not intersting anymore.

    I also agree with the Tikka & Daal theroy. Most people, will use what they are used to use, very seldom leaving leaving that path. They don’t want to choose what olives and cheese to have on the pizza. They want a few ready options to choose between. That is why portals like Yahoo, MSN and AOL is enough for most people.

  20. Nice to give Jeff Nolan credit. He has been talking about Enterprise 2.0 but not in a hype way. He’s got real talking points with ‘meat’. It’s boring but boring makes money but not traffic on a blog.

  21. I agree 100% about web 2.0 companies being focused on marketing themselves only to web 2.0 beta testers.

    My new company, while not a web 2.0 company (it’s a telecom service), uses many related technologies like Rails, AJAX, etc. Not that it matters, we’re marketing the service to users outside of the Bay Area, most of whom will not know (or need to know), what’s under the hood. All they’ll know is that we offer a very cheap (mostly free) service that makes it easy for people to coordinate their soccer team, chat with extended family, etc. They also haven’t heard of 99% of the newest Bay Area companies.

    That’d be my advice to startups here. Think about whether you could get a reporter for a paper in Idaho to write about you. If the answer is no, there’s a good chance you’re building for beta testers, and not real users.

  22. chauka,

    thanks for the email, and the link to that podtech. i am going to download and listen. i kind of have always wondered why the enterprise apps were so hard to use. that comment sums it up.

  23. chauka


    What you have captured with respect to Web 2.0 likely having a significant latent effect in the enterprise seems to be in line with what Google’s GM of Enterprise (Dave Girouard) reflected in his keynote presentation at InterOp 06 recently < > when he said (excerpt from the page (there is a podcast available btw):

    “Consumer technology is driving innovation,” he told a crowd of enterprise technology professionals. “Generally enterprise technology isn’t really designed with the end users in mind–it’s designed with a business process in mind.”

  24. vinnie,

    i think a lot of web 2.0 front end/user interface innovations are going to be quite helpful in the enterprise. not really the back end stuff, but i think the biggest problems of SOA has been the user experience. Same goes for all sorts of browser-access apps like the PeopleSoft’s human resource management console etc.

    More thoughts? comments?

  25. I live in the enterprise world…and I call it the “unbearable lightness of web 2.0”. The enterprise is so used to compliance, control heavy eveything that they are suspicious of anything that could be built so cheaply, quickly, in a mashup, community setting…it sounds so California ,,,and incumbent vendors SAP, IBM, Accenture themselves want to pooh pooh it because they realize they are grossly over priced in comparison…I recently had a post in response to someone who asked “Is web 2.0 ready for the enterprise?” and I asked “Is the enterprise ready for web 2.0?”