The worst thing about all the Web 2.0 hype is the complete loss of business perspective. There's a few companies out there that seem to get it but just about every other new website I've seen lately is nothing but features parading as businesses. Sure, these guys get to be entered in the "Flip It Quick Acquisition Lottery", but beyond that, none seem to be creating anything of any real value. Yeah, I've bitched about this before, but hey... today seems like a good day to start in again. I mean, not only is Bloglines not updating so I don't have much else to write about, but I saw Jeremy's link to the 16 ways to think in Web 2.0 and sure enough, not one of the points included anything about actually making money or creating a lasting business. It's like the hype has climbed to whole new levels overnight.
What part of "Version 2" don't these people get? Doesn't anyone remember the web bubble and bust from the v1.0 days? Remember what happened when Alan Greenspan finally looked around and said, essentially, "WTF is going on here?" Are they really that eager to duplicate that experience?
Let's go back in history (2004) to the conception of the term "Web 2.0" itself - the shining examples then were Amazon.com and eBay. They didn't just open up their back ends for developers to use via XML APIs over the web, they made A LOT OF MONEY doing it. That was the key: Every Amazon.com API transaction ends up with a purchase from their site. Every eBay upload ends up with a listing or a purchase or something as well. It was clear, Web 2.0 was about platforms, open APIs enabling real business, not the overhyped traffic generators of the late 90s which did nothing but waste a lot of investor's money.
I've still got the little "Internet Metrics" book they handed out at the O'Reilly conference back then - the contents page reads like this: "The Mobile Platform, Music is a Platform, Search is a Platform, The Telephone is a Platform, Media is a Platform, The Platform Revolution," you get the idea. There's one section on the Architecture of Participation - what we now know as the infamous "User Generated Content" but the rest of the booklet was focused on web based platforms, and metrics concerning real business issues.
But since then Web 2.0 has just mutated. Somehow the focus flipped from "making" platforms to "using" them. Ajax came along, Social Software and Tagging took over, RSS alone was considered an API, a few companies got bought, mobile was forgotten about completely and somewhere along the way the whole part about the "business" stuff went totally out the window. Hey, I'm all about creating useful and innovative software for your users, but if you can't make a profit, you won't be around long enough to make any sort of difference, and will probably cause more harm than good. So why is this happening?
Flickr is always held as an example of a 2.0 success story - which it is, but it seems for all the wrong reasons. Does anyone remember that Flickr has always charged money for their pro accounts? They were trying to make a profit from their site from the start, not just throwing stuff together for the heck of it. The social innovations like tagging, and blogging integration were essentialy marketing efforts built on top of their platform meant to drive more people to sign up for the pro photo storage service or click on ads, not core parts of the product itself. It wasn't social software for the sake of social software, it was "how can we make this product attractive to users and developers in order to drive revenue?" In other words, it was a real business.
But let's think of some of the popular new site launches lately... web chat and IM comes to mind. WTF is the business? All those Map mashups out there? WTF is the business? Calendaring and Ajax desktops? WTF is the business? They're just FEATURES built on top of other company's APIs, adding very little real value, and not making a dime of profit. Do you know the Microsoft Word Lesson? It's that an old version of Word from a few years ago has more features than any of us could possibly need to use. We all use 10% of the app at most, and yes though it's all a different 10%, there comes a point when more features isn't a bonus any more. Consumers just don't care after a while. Microsoft has had to go back to the drawing board and try to completely revamp their Office products in an attempt to get people to upgrade because after years of shoving in feature after feature it just doesn't work any more. This is the lesson the web doesn't seem to have learned yet. We're seeing all these feature-oriented startups lately - site after site of them. But does the world need more features at this point? They're not using the ones they already have. It's basic supply and demand, right? We're entering a glut of new ways to do the same old things right now, and that means the value for this stuff is accordingly low.
But say you do have something cool, and your new innovation has that 10x improvement that a new service needs to really take off. Not that there's a lot of this out there, but still. You can create a new website, fill it with all the goodness in the world, be good to your users, and be a good netizen and use every open standard there is while you're at it, if at the end of the day your users didn't put money into your bank account, it's a useless waste of time for everyone involved. I mean, hey, if you want to create the next non-profit service like Wikipedia, all the more power too you. But if you want to get VC cash, an office in downtown Palo Alto, do a bunch of development, attract lots of users and pretend you're a business? Then act like one, create something of real value and make some real money from it.
No, not every company needs to be a platform - look at the Weblog federations for example. They're making money like people have done for a hundred years or so: hire writers, sell some ads, publish using standard technologies. Nothing too innovative, but they're making money and I totally dig that. Then again, those writers are generating real value, IMHO, so there's something there to make money from. But the technology plays - the social services or the new whiz bang websites where the product is the way something is done, and not what is being done? Those guys need to get it together.
Break it down - it seems pretty simple. You create a product or service with some inherent value, and then make money from that value and if the money you earn is more than it took you to produce that value, you've got a business. It seems like the market is forgetting that second part (again). Take a look at Zillow.com - they went out and got really hard to find data which they organized and made easily searchable with a great map interface. Cool. But then they forgot the second step it seems - MAKE MONEY from that value. Why in god's name I don't have to give them my credit card or something to see this data which can't be found anywhere else, I have no idea. Maybe they have some grand plan that doesn't involve those useless text ads on the side of their page, I don't know. But I won't give them the benefit of the doubt because they just launched - putting the free toothpaste back in the tube is a great way to piss off early customers and kill your business.
Maybe it's because I straddle the Web and Mobile worlds why I think this is such an issue. I deal with companies every day who have no qualms about charging 25 cents to send 160 characters of data from one person to another, or who have no problems charging $3.00 for a 10kb .gif image or a bad .midi version of a popular song, or even up to $10.00 for a small Java clone of Tetris - a 20 year old game. Unlike the web world, the mobile world is accustomed to charging for every thing that has the slightest bit of value. The difference between the markets couldn't be more drastic.
I know of a mobile chat site that's on many carrier decks that's a great example of this. To use it, you need to sign up to a subscription for $3.00 a month, and in return you get a URL which links to a very basic WAP based chat. This would be okay in my mind if there was some sort of extra special functionality, but there's not. Are you a Java programmer? You know that sample chat servlet from 1998 that explained how "sessions" worked? That's almost exactly what this is. I type a message into a text field, click send and it appears on the web page when it reloads. If I want to see what the others are writing, I click refresh to reload the page. That's it. You can actually send some private messages as well, but this is not amazing feature. In fact, there's no security on it at all - I could give you the URL and you could start playing with it right now from your PC browser. But don't get me wrong, it's not that this is a bad service or a rip off - they are providing a chat app as promised and it works. It's just the fact that this particular app could be written by any developer in the Valley in less than an hour, and yet they easily have thousands if not millions of paying subscribers world wide.
Why is there such an massive dichotomy do you think? The markets aren't that different, and contain mostly the same people - the overlap of people with mobile phones who also browse the web is probably near 100%. Why will people gladly pay $3.00 for a basic mobile chat site and not pay anything for a decent web service? I think it's mostly because of expectations, and honestly, the naivete of many of the people trying to start "businesses" on the web today. Hey - I'm not calling the kettle black here, I've already been very clear at how horrible a business person I am already, and expressed my deep frustration at this. But that doesn't mean I have to sit back, read sites like TechCrunch and not say WTF?
Okay, I've ranted enough. But I really do think there should be a litmus test for new web apps launched from now on - something very basic and if they don't pass, they don't qualify for any buzz or linkage. It's a simple test: Will they take my credit card? That's it. I don't care if they have advertisers or sponsors or god knows what else, all I want to see is a place where I can type in my credit card for some service. Maybe it's a Pro account, maybe it's the main service after a trial, or maybe I don't get jack until I pony up the cash. Regardless, that's my test from now on. And that's also my addition to that 16 ways article too: "Have an obvious way to take customer's money."
Seems very 2.0 to me.
Update: Dion Hinchcliffe who wrote the original 16 points article emailed to point out an update he added. He agrees that there was no business points made, but that he was really focusing on something completely different. And in fairness, he's covered Web 2.0 Monetization and Creating Real Business Value With Web 2.0 in other posts/articles which I didn't see before.
But I still maintain that you have to think about the business model and the customers from the very beginning, incorporating them into your application and design otherwise you end up with a very different product or service than one that will allow you to create a lasting business. If you want to "think" in Web 2.0, you should be thinking not just, "how can I make this cool ajaxy social web service thing", but "how can I make MONEY off this cool ajaxy social web service thing."