Wednesday, April 12, 2006

Web 2.0's Startup Fever

The Technology Review reports that a lot more people don't think the Web 2.0 phenomenon is going to last too long.

This explosion of new Web sites -- a phenomenon often dubbed "Web 2.0" -- is great for all kinds of Internet users. But how long can this new crop of startups survive without charging for their products?

The answer, in some cases, may be not long. Simply put, many of these outfits, much like their dot-com predecessors in the late 1990s, don't have business models. The most common revenue source in the Web 2.0 world is contextual advertising -- but, as some analysts point out, the nickels and dimes earned when visitors click on ads provided by the likes of Google's AdWords barely bring in enough to cover the costs of Web server hardware. Consequently, some industry watchers believe that a shakeout is likely within the next 12 to 24 months.

The winnowing of Web 2.0 won't be as bloody as the dot-com crash of 2000-2001, though, simply because these companies never accepted much venture funding and have far fewer employees. What's more, the underlying technologies won't disappear -- more likely, failing companies will be bought up by slightly larger competitors in a wave of consolidation.

So what else is new? ;) No really, there just are too many people out there vying for too small a target audience. Is there a way to survive instead of dying out? Other than getting bought by one of the big guys, apparently not.

Companies can survive the Web 2.0 boom, Ali says, by doing one of two things. They can attract the interest of larger companies, who buy a technology and bring in its developers rather than developing their own version. Flickr, Delicious, WebJay, Konfabulator, and Upcoming, for instance, have all been acquired by Yahoo. Or else startups must acquire so many users that they gain an insurmountable lead over competitors, as YouTube seems likely to do in the video downloading market. Or they can both, of course, like MySpace, which has more than 50 million users and was purchased in July 2005 by Rupert Murdoch's News Corp.

Also, I just read that apparently most people using a search engine expect to find what they are looking for on the first page of results, says a US study.

At most, people will go through three pages of results before giving up, found the survey by Jupiter Research and marketing firm iProspect.

It also found that a third of users linked companies in the first page of results with top brands.

The study surveyed 2,369 people from a US online consumer panel.

Well it still just a survey that's a little skewed towards only American consumers, but interesting nevertheless. I always wade through at least 6-7 pages of links with every Google or Yahoo or MSN search.


Leighton Cooke said...

All the cool stuff's on page four.

Chris said...

Interesting read on Web2.0. I think that if you look at the market of Web2.0 is that web developers are diversifying and typically they have cashcows funding all of their other startup sites.

Patience is the name of the game in Web2.0, unlike dotcom where sites flew through the roof in a matter of weeks.