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Web 2.0: End of Innocence

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David Galbraith, a good friend of mine, is not a man of extremes. Polite to a fault, he uses logic to make his arguments. Today, in response to our My Maps post, he wrote a stinging piece, The Day Web 2.0 Died. Hyperbole? I don’t think so, though I would like to make his case, while opting for a milder headline.

tiedyedshirt.pngThe Web 2.0 story so far has been about taking APIs, mashups, low cost infrastructure and building applications that are then offered to customers for pretty much free, backed by an ad-supported business model. Think of this as the tie-dyed-free-love hippie phase. The Web 2.0 conference held in San Francisco in Fall 2006 was its Woodstock.

A lot of good things happened, innovation blossomed, but now we are entering a more pragmatic phase, where the large players like Google and Amazon who distributed the API elixir are taking control back.

Google My Maps is a case in point, where the company is competing with its “users.” Don’t worry – it won’t be the last time you will see Mountain View adopt tactics that in the past were associated with Microsoft. Keeping that $145 billion market capitalization intact is a bitch!

Google is not alone, as one of my readers points out. Michael Arrington has been following the feud between Amazon-owned and Alexaholic (or whatever it is being called this week.) In the end Alexaholic/Statsaholic features ended up becoming part of offering. Why let a little seemingly parasitic service live if you can make ad dollars off those page views?

The Flock-Coop conversation from earlier this week is yet another part of the Web 2.0 jigsaw. The emergence of hybrid web applications or MySpace flexing control over its widget ecosystem are all part of a fundamental trend that can be summed up in two words: Get Real!

The fundamental tenets of Web 2.0 or what I like to think of as the connected web are as valid as ever before, when Tim O’Reilly wrote his manifesto. However, innovators, entrepreneurs and even larger players have to take off the rose-tinted glasses, and worry about web giants’ ability to go from friend-to-foe almost overnight.

What do you do then? How is your business model impacted by such moves, and how much wiggle space you have to charge your customers? In other words, one can’t be wide-eyed about anything anymore.

The current situation is no different than the dating process. The first few months of flirtation are full of romance, where all you choose to focus on is your partner’s best qualities. Three months into the relationship, the nose hair, shoe fetishes and other habits come as a bit of rude awakening. We all adjust, if we believe in the relationship. If not, we go looking for a new love.

It is hard to fault Google, Amazon or News Corp: they are publicly traded companies that have powerful shareholders, who demand (not that they get) some kind of financial accountability. As a start-up, you have to think of your worst case scenario.

In response to Google’s My Maps move, Platial had this to say on their blog.

While no entrepreneur is excited about potentially competing with Google, it had to happen…. There are a number of friend/foe relationships that spring up when you have alliances and markets with rapidly evolving needs. Our business will be disrupted too in some ways but it was time.

I would like to call it, the End of Innocence.

43 Responses to “Web 2.0: End of Innocence”

  1. The industrial strategy of large organizations using small players to develop necessary elements in a value chain, and then harvesting these developments before the challengers can gain financial stability, is as old as the hills.

    What’s surprising is that anyone is surprised at the manifestation of this strategy in our times, or its consequences — richer hegemonists.

    I wonder what it must be like to be a modern-day tinkerer generating solutions with potential value, now knowing full well that it’s likely the value is going to be absconded with by some dominant industrial power. I imagine that the drive to invent is irresistible for some, and that they’ll take their small wages and be happy after the denouement, just to keep working.

    Others may see this as one big crap shoot, worth the effort to play even though the odds are ridiculous. The press hype promoting MySpace, YouTube, Facebook, etc., as models for the future of commerce may not have been orchestrated, but it’s certainly done its part to enable these tech-gamble junkies.

    The Internet is a big place. There are many, many ways to exploit its potential besides redundant development — in the sense of doing what everyone else is doing, purpose and content notwithstanding. A tad more real originality and less mimicry would suit the situation just fine. Forget “Web 2.0” and start thinking again of what’s missing in most people’s lives. It’s probably not mashups.

  2. . . . A number of recent events suggest a potentially significant evolution of Web 2.0 from a business perspective. Those who fail to notice these early signals may find themselves sidelined as Web 2.0 continues to unfold.

    Om Malik did a posting late last week on “Web 2.0: The End of Innocence” which nicely summarized some of these early signals . . .

  3. maybe the little guy should stop complaining and “get the hell out of the kitchen”. i personally feel a little overwhelmed by all these kitschy catchy 2.0 wannnabes that are trying to oversaturate an already oversaturated market with a small twist on one of the bigboy services.

    damn right google is going to take what works and put the innovators out of business.. it’s the walmart effect, and sorry if i don’t have much sympathy for the mom-and-pop startups that feel the heat. in fact, i am now going to purposely strive to make my sites as 1.0 as possible… maybe 0.1 … i’d like to see a return to yahoo ’96 design style.. white page, text, a couple of links, and a whole lot of br tags. before they got all high tech with forms and colors and whatnot. ah, those were simpler times, weren’t they? i miss that humble beauty… “give me five tags and notepad, and i will conquer the world” -anonymous hero

  4. Google should have gone ahead and advised people against developing businesses around its web services. The people who went ahead and assumed that Google would never do anything to harm them did base a lot of their assumption on the ‘unevil’ and ‘a different company’, myth. This awakens people to the truth that a company is a company and is there for making money and not for public service. Guess the days of being unevil evaporated with the IPO.

  5. Mashup innovators should understand that in doing so (mashing up existing technology that is), they might drive some traffic. But we all know that traffic, in and of itself, doesn’t necessarily convert to cash. Traffic does, however, make giants hungry to consume it. But let’s be real. Many of these mashup innovators want nothing more than to be swallowed up by someone else. This isn’t the case when real innovation takes place by true technologists who create something that they are passionate about.

    Often the Internet and post-bubble web 2 environment is reminiscent of the property market over the past 10 years. A lot of generous valuation and exchange and profit taking place as perception becomes our truth. But when you value things on perception and market activity rather than true value it will almost certainly be temporary.

    Web 2.0 is dead. Long live web 2.0

  6. I agree that it is a risky business to build a mash-up based entirely on one company’s API. But I truly believe in the internet as a distributed desktop – and I see a future where computing will be internet-based with lots of small, independent internet applications serving the needs in the market. I don’t believe that Google will do to the internet what Microsoft did to the desktop.

    We in Second Brain are to some extend a big mash-up – but our strategy is to bring in all available internet-services into one simple library for the user. This way, we depend on other services opening up their content and functionality, but we hedge our bets by connecting to the many, not just to a single service.

    The main problem we solve for our users is to see all the services they use in a single library. If they want to access/edit any of their stuff, they are forwarded to the source/service.

    The main problem we solve for the services is to bring more users to them.

    We make it easier for users to take advantage of the many internet services, and make it easier for services to reach new customers.

    We are looking for the strategic sweet-spot between users’ needs for simplification and services’ need for more users.

    Second Brain is currently in private beta, but we are looking for Test Pilots.

  7. Oldtimer

    While no entrepreneur is excited about potentially competing
    with Google, it had to happen…

    This sentence was true fifteen years ago, you would simply have replaced the word “Google” with “Microsoft”. The question to be answered over time is whether Google will be a benevolent goliath or a monopolistic bully.

  8. Jay (living in First Life)

    I wonder when VCs will stop being dumb and investing in companies like RockYou. They only exist because of Bebo and myspace.

    If your company is built around mashups, all you have is a company, not a BUSINESS. Is Y-Combinator listening?

  9. Well, ladies and gentlemen, we’re not here to indulge in fantasy, but in political and economic reality. The point is, ladies and gentleman, that Google — for lack of a better word — is good.

    Google is right.

    Google works.

    Google clarifies, cuts through, and captures the essence of the evolutionary spirit.

    Google, in all of its forms — google for life, for money, for love, knowledge — has marked the upward surge of mankind.

    And google — you mark my words — will not only save Web 2.0, but that other malfunctioning corporation called the Internet :-)

  10. Stephane Rodriguez

    Was there ever an innocence in web 2.0?
    – could startups simply expect to use someone else’s database, freely and forever?
    – could you name a company that made a commitment to never alter the Terms and conditions behind the use of the APIs, particularly the free use?
    – could not you see a number of months ago, when Google killed the SOAP-based search API that from there the writing was on the wall?

  11. I see this as a positive move towards a wider adoption of the concept of “personal geography”, which I think is an idea not very much extended among mainstream Internet users, and we see opportunities there for Tagzania, one of those social mapping apps.

    It’s also interesting to see Google catching up with concepts that we had clear when we launched in 2005: create your maps, adopt GeoRSS… Obviously, we have to push further, being ahead of Google is like an interesting challenge.

    On the business level, others will feel more pressure. Ours is a side project for a small company, sustainable so far, and feeling no pressure from investors or the bubble-burst-buzz around. Our focus is strengthen the features of Tagzania to better please users, and don’t care much about Techcrunch gossip or how others may be sweating. As for the big actors, Google, Yahoo: We see their adoption of standards as a positive move, and the availability of APIs and web resources that precisely those giants are pushing, that’s only good news for us. Then they add direct services that start-ups have imagined first, but, of course, we know that’s going to happen some day, with this, that and many other things. But ther’s room for niches and tailored community websites or services, no doubt about this.

  12. Om,

    The way I see it is that if your startup is based solely on the basis of a mashup, you should have already figured such a scenario into the equation. There are literally hundreds of startups that are solely based on the MySpace ecosystem. If Myspace pulls the plug, thats it. Party’s over.

    Interestingly and coincidentally, there’s a story in the Financial express about the lessons that can be learnt from Indian cricket:
    The most notable of these is the criticality of planning: not just for the next few games but for the next several years. In turn, this planning requires the ability to see trends, visualise how these trends evolve over time and consequently impact the venture, if not now, then in the foreseeable future.

  13. @ Greg

    Great points all around. The one area I don’t completely agree with is the blanket concept that big companies/orgs can’t possibly move fast. Sure I agree that guerrillas tend to be quite nimble, but oftentimes their agile maneuvers do nothing in the long-term but point the big guys in the right direction… The Facebooks/MySpaces/YouTubes are much MUCH more rare than the 30boxes/flocks/etc…

    Make sense?

  14. @ Jeremy

    Because the guerillas know where to look and who to correspond with to get the latest breaking innovations they can incorporate into their arsenal. I wasn’t just thinking about code (and certainly not AJAX) either…guerillas are able to produce better content quicker that incorporates all facets of media while bigger content companies are still deciding on what powerpoint template to use for their storyboard.

    One example of a guerilla is Farouk Olu Aregbe, the guy who got 200,000 people to sign-up for an Obama Facebook page in two weeks (while I’m sure some established political strategist was deciding what font to use for a document that would describe how to tap into the youth vote).

    It’s just my two cents, but I think a lot of people want to find a way to get rid of the name 2.0 so they can come up with their own conference. Open Source is not going away. Grass roots wildfires are not going away. Broadband adoption is not going away. Am I missing something?

  15. …those who insist on attaching their hopes and dreams to the bodies of charging giants’ APIs…may be destined to live the life of a lamprey…able to take in just enough nourishment to keep from starving…unless the giant decides to cut off their food supply entirely…

  16. Om – good points all around. In my eyes this is (finally) the “reality check” that “2.0 entrepreneurs” need to see in order to go back to the drawing rooms and go off to build business that are truly innovative and differentiated.

    @Greg: why exactly will the “2.0 guerrillas” be able to run rings around established companies?? Because they know AJAX, or because they have more sound business practices?

  17. It’s just reality. I read some stories about company valuations, that are based on the premise of other sites… which does not make sense.

    It does remind me of some of the stories from the dotcom era (hey, I was here at least), and the innocence (and lack of memory) that seems to be part of Web 2.0.

  18. It should be interesting indeed once Major players take back control of their respective API’s.

    Another thing yet to be witnessed is Youtube’s profit sharing model with its users. A likely scenario of this could lead to a price on using Youtube’s huge repository of videos. Hence all the websites which are dependant or using on youtube videos on their sites will have to pay a small fee for access. Here’s a good way for Google to make money and share with youtubers…

    Danial Jameel

  19. I like your tagline better. Stripped of the belief that the heavyweights want a love-in, the guerillas that drive Web 2.0 will run rings around the heavyweights better than they have done before. Hardly an end…maybe a more REAL beginning.