For me the Web 2.0 conference has been really exciting and the air has been full of energy. But I'm new in the Silicon Valley, so I've been curious to listen to what other conference attendees have been saying. A lot of them share my enthusiasm, but there's also a fair amount of what could be termed 'cynical buzz'. People who perhaps lived through Dotcom Boom and Bust I and are now more cautious in the sequel: Dotcom 2.0.
John Battelle just asked (as I type this) eBay founder Pierre Omidyar if we're "getting to another bubble". Pierre says there are so many creative people inventing innovative things - and the barriers are much lower. Fundamentally that's a good thing, he says, but there'll be much more competition. So he sounds positive (but then that's his job, because he's investing in this stuff). So...grain of salt and all that.
Fred Wilson is taking a careful approach to investing in 2.0. He wrote today of "seeing second derivatives" in Web 2.0. For example Fred heard a business described as "Google Maps meets delicious, and another described as Skype meets MySpace." He concludes:
"When the first derivative hasn't fully figured its long term business model (other than getting bought), the second derivatives are pretty scary. I am a contrarian at heart. This situation bothers me."
Fair comment. In all the conversations I've had, the main business models I've heard are getting acquired or contextual advertising. There are other business models though - e.g. subscriptions, premium content. Some of the successes so far of Web 2.0 - e.g. topix.net and Bloglines (I met and chatted with the founders of both today) - have profited greatly from those business models. But how many others can/will? Are we too reliant on Google, Yahoo and the other bigco's for acquisitions or advertising revenue?
Henry Blodget, (in)famous former Wall Street Internet analyst, has just started blogging. He had this to say on the first dotcom era, what he learned and how it could be applied in the current era:
"One reason for my success in the boom years is that I was optimistic about the prospects for a handful of Internet companies at the right time [...] The first stage of my own personal dotcom bust came when, along with many others, I stayed optimistic too long."
So that's why we're seeing cautious optimism - and cynical buzz. We don't want to be optimistic for too long, but we certainly want to enjoy the sun while we can. I certainly do, being a fresh face in the Valley and wanting to take the opportunities before me while the time is right. And the time is right/ripe, no question. Actually I think there may be another bubble when mobile technologies take off in the western world, but I'm talking for now about Web 2.0 and social software stuff.
I'm wrapping up this post now, just as Tim and John are wrapping up the conference. It's been a fantastic 3 days, very very busy and bustling, and hugely enjoyable. I'm buzzing - but trying my best to be just a little cynical ;-)
Comments
Subscribe to comments for this post OR Subscribe to comments for all Read/WriteWeb posts
Hey Richard,
Sounds like you're having a blast Stateside...you're certainly posting faster than I can read!
I do have to take issue with this post a little though...I think you already know this, but just to be clear "1) getting acquired..." is not a business model. It's a gamble.
It might be a calculated gamble if you have backers with the right kind of connections, and you're building a feature which would be attractive to one of the portal/content guys with enough critical mass...but it is not a sustainable business model in itself.
Is my notion of what makes business model too old fashioned?
Posted by: Charles | October 7, 2005 7:54 PM
This goes perfectly with Boom 2.01. Glad to see others are sharing my perspective on things.
Posted by: Scrivs | October 7, 2005 10:15 PM
Whoops no HTML in comments. Here is the article I was referring to:
http://9rules.com/whitespace/boom_201.php
Posted by: Scrivs | October 7, 2005 10:15 PM
Building a business simply to flip it is definitely a gamble... but I think that a lot of these companies are building their products/features with the hopes of two things:
1. Build a huge user base and hopefully get acquired
2. Build a huge user base and hopefully figure out how to monetize the user base later
Both of which are gambles in my opinion.
Richard,
There is also a third and very real type of business model that a lot of "Web 2.0" oriented companies are executing and that is the subscription based service model. Companies like mine (Webmail.us), Typepad, 37 Signals and even Salesforce.com all do charge customers a monthly or yearly fee for services. In my opinion, this is the soundest model although in many cases it presents challenges with the exponential user base growth some of the free companies experience. But I think most of the companies I just mentioned are indeed trying to build businesses, not features to flip.
My two cents.
Posted by: Pat | October 8, 2005 10:32 AM
Hey Charles! Good point you made. It may not strictly be a business model, but it does seem to be the goal of quite a few start-ups.
Pat, you're right subscriptions is a great business model for some web 2.0 companies. I updated my post last night based on the conversation I had with yourself and a few others at the conference. This morning I tidied up that part of the post some more.
Posted by: Richard MacManus | October 8, 2005 11:04 AM
(Thanks for all of your coverage of the conference, Richard!)
One thing about the "being acquired model": acquiring companies like Yahoo and Google have successful business models which include using free services as (essentially) lead-ins to pay services.
So, when a new company is developing a service that doesn't make money per se, but is designed such that it can compliment Yahoo or Google business models, it's maybe still a gamble, but it's also maybe a savvy gamble.
But, I'd compare some of the recently acquired sites, like upcoming.org, as being more like inventions than businesses.
I think it's great to see good "inventions" getting bought by companies that can promote them widely through their larger scale commercial power. On the other hand, I'm sceptical about the "web 2 attitude"-style inventiveness thriving in the larger scale commerical environment.
Posted by: Jay Fienberg | October 9, 2005 7:26 PM