The Myth, Reality & Future of Web 2.0

55 Comments

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 Comments

Eric Kotonya

Most Web 2.0 companies are built on foundations of adventure and excitement. That is not sustainable. Robust, mature offerings are few – for that reason, many Web 2.0 startups dont last.

There is immense untapped opportunity – specifically
1 – PUSH INTERNET the social networking thing has pushed internet growth exponentially – this has made it impossible to really search the internet using traditional search engines – a “push-to-user” internet search engine would be desirable, as a replacement to the current pull technology offered by google, yahoo, msn…

2 – MASS E-COMMERCE building a business and earning online is still difficult – there is SSL, payment gateways, earnings remittance, cash backs, sold goods delivery and instant availability of detailed product information to the customer to worry about. The first Web 2.0 to simplify this process will definitely possible will fly.

alexanderhorre

Web 2.0 has a marketing slogan is dying, yes. It’s bread and butter isn’t. Most importantly, a better name is within the slogan’s definition: a social web. It’s all about user-generated content, or co-creation of content and experience within interactive communities, affiliation and accreditation.

Jennifer

I’ve been experimenting with various collaboration & document sharing tools and have discovered an excellent site. It is a very user friendly, web-based application that is well worth taking the time to explore. Take a few minutes and look at Projjex.com. The tutorials are excellent & you don’t need to be a Rocket Scientist to figure out how to use it. It even offers a free version so you can try it on for size.

Domonic Mongello

This post was started one year ago, has the argument changed? Not really, but what really surprises me is why the basics of every business not being applied to most Web 2.0 start ups. Make money, profit… The fact is most Web 2.0 start ups can be started for less than $10,000. This includes, beta portal, business plan, corp, bank account, etc… but one thing for sure, without a plan to make profit it is earmarked for failure.

Scott M. Britner

What else can there be but “me-too” ideas?

We sing praises of Google but it was just a search engine with a million dollar bankroll and good marketing.

We sing praises of YouTube but it was just a video site with a million dollar bankroll and copyrighted material people wanted to watch.

I applaud anyone willing to get off there a** and take action on their ideas – especially in the face of others putting them down because they’re not “innovative”.

BlueMountain was just an electronic greeting card. Sold for millions.

Flikr was just pictures. Sold for millions.

The most boring, crappy idea can be worth millions in the hands of the right marketer.

The most innovative idea can be worth $0.

I guess it all really depends on how you define success. Is it about “making a difference” or is it about “making money”. Because there is a Huge difference.

Scott M. Britner
$10,000 Dad on a $250,000 Mission
http://www.PassionatePurpose.org

Scott Annan

Spot on!

Absolutely right. I have met with dozens of executives from many industries from fortune-500 companies and they are saying the same thing: “Many (most!) of our applications are not critical to our company – they should be SIMPLE, INEXPENSIVE, and EFFECTIVE. And they should be able to evolve easily.”

I think these are the core principles driving the web2.0 movement and I think that companies are definitely ready to embrace it.

Anyone who is interested in helping us introduce it to them, send us a note (send to info@mercurygrove.com).

Great post!

Brian Massey

I run an audio production company. I use Zookoda to maintian subscriber lists and syndicate podcasts to non-RSS folks. Our feeds are tracked by Feedburner. Our popup player is AJAXTunes. Analytics by Google. I track my time with SlimTimer. I engage my clients with AirSet. These are all free Web 2.0 services and they form my online presence. If one goes away there is one to replace it.

These sites are highly reactive to my requests and as a result they have user interfaces that work the way I do. Simple and direct.

I see Web 2.0 as ideas manifest. Ideas are “a dime a dozen.” Some are shared widely, others fade quietly, but all of them contribute in some way.

I think Enterprise 2.0 will thank the 53561 companies for training a whole generation of integrators and users, esp. as more of the latter become the former.

Andrew Findlater

Hi Hope – medical librarian, I work for “medical publishing behemoth Elsevier” and would love to understand more about how we can improve stuff for you.

Drop me a mail.

andrew.findlater@rbi.co.uk

ANdrew

Dimitar Vesselinov

The lack of innovation and imagination is a major problem for many web 2.0 startups. “Me-too” products, more of the same features, copycats…

edslanding

web 2.0 is simply a business model. it is cheap: 1) free open source (no more enterprise software) 2) reliance on the community to resolve problems (no more costly service plans) 3) lower hardware costs. allows builders the option to provide free services to consumers. to generate revenue, builders use google ad sense for example. roi is much easier than in the old days. believe me, we have succeeded the old way.

Modded Up

The future of Web 2.0 is too soon to decide, at the moment VC’s are throwing money at anything with a little panache, no substance and flakey sustainability.

Whether it’ll last is unsure, it didn’t last time.

G. Roper

Why hasn’t anyone said it on this forum:
“Web 2.0 is bullshit marketspeak. There is nothing “there”. Web 2.0, like the Emperor, has no clothes.”

It’s certainly become clear on other forums that “Web 2.0” has no meaning other than as a magic word- an “Open Sesame!” intended primarily to open managers’ and VCs wallets.

Tamera Kremer

Om, I agree with your take on Web 2.0 and the ‘bubblet’. I was mentioning this to a friend this weekend, and had the same conversation at the mesh conference yesterday as well. The buzz around Web 2.0 feels similar to the dot com bubble. A lot of “you corporations don’t understand” and “this will change the world” being thrown around and it’s a bit unnerving. I think adding social networking and continuing to build better apps and ways to communicate are key to the growth of UGM or CGM and innovation. But… how is it monetized? What is the revenue model? And once you have one, the next step is a buyout from a large corporation who will of course, not be looking at the Web 2.0 philosophy in quite the same way as the early entreprenuers do. They will look at it for its power to sell more products, collect more relevant data on consumers, etc.

The conundrum for me is, and something I’m going to be blogging about, is this: Flickr works as a social network, or YouTube, or MySpace, or whatever, because it’s free and easy. Free is always the best way to create buzz and capture market share. What happens when the VC’s, or parent companies want to start generating a return on their investment? Will consumers still sign up in droves once it costs money and includes product placement? Maybe. Maybe not. But it is something to consider when trying to start and secure funding for a web 2.0 venture.

ps – interesting talks at mesh yesterday. I particularly appreciated your analogy between the differences in the types of conversations ‘magazine style’ websites and blogs generate and the audience they are targeting.

Michael Eisenberg

Web 2.0 will be no different than web 1.0 or anything other tech change except that this one is content driven and hence the technology is the commodity this time and the value is created at the app level. Standards (RSS, AJAX etc), user generated content and low cost distribution will simply reduce the cost of launching businesses and conducting business on an ongoing basis. However, the core issue remains the same: is there a business opprtunity where you play or not? In web 1.0 there was a business opportunity in auctions (but only for one player) so Ebay emerged. There was not one for Pets so many companies died.

I would add one more caveat. VCs look at this web 2.0 thing through VC eyes, i.e. can you make a very big company out of this idea. I think there will be a lot more lifestyle business built on these cheap standards which will not seek nor be suitable for VC investments. I Call this web 2.0 phenomenon “the corner grocery of the new millenium.”

Sam Elowitch

If the Internet were a commercial application and I was putting a feature request or bug report, one of the first things I would ask for is a major revision of the way typography is executed online and for a recommitment to full implementation of the complete, morphologically correct set of Unicode characters.

I am sick of being stuck with Arial, Verdana, Times, Georgia, and a a handful of others when I design web pages (or at least, those that I expect to crawlable by robots, which in my case is all of them). I hate the fact that it is impossible to produce good and consistent-looking glyphs for things such as fractions that will work regardless of what fonts are installed on the user’s computer and what platform he/she is using.

There has got to be a way to render fonts in web pages that doesn’t rely on locally installed fonts but which also does not place an inordinate load on web servers.

CSS 3 would be a good start. But where is that?

Isabel Wang

Do Web 2.0 companies really see Techcrunch’s readership as their target market? I would suspect many of them are aiming for the 68.8 million users who visited at least one social networking site in April 2006 (according to Nielsen Netratings). 10 million from this group used Photobucket. So maybe more than 53651 people are paying attention to Web 2.0 tools?

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