There is more to Web domination than Web 2.0

Over the past few months, I've found that a too healthy regard for my own party line on open source occasionally kept me from seeing--or, at least, stating--truths about how to go about building an open-source business.

It turns out that there is more than one good way to "burn the boats."

Judging from Tim O'Reilly's latest post about the cloud, it looks like I'm not the only one to turn a useful trend into an all-consuming principle.

In O'Reilly's case, the principle is Web 2.0. It's a good idea with serious implications for building businesses on the Web, but it has come to explain too much for him. He dismisses cloud computing's potential to harness big systems to earn gargantuan returns (and monopoly power) on the Web. He suggests instead that Web 2.0--the harnessing of collective intelligence and the concept that applications improve the more people use them--is the key to "market domination" (my words, not his).

However, as pointed out astutely by Nick Carr, O'Reilly's single-best example of Web 2.0 dominance--Google--actually disproves his thesis. Google is a classic example of a proprietary business, not a Web 2.0 business. In an effort to see all roads leading to Web 2.0, O'Reilly fails to see that it's just one road among many, as Carr points out:

The network effect is indeed an important force shaping business online, and O'Reilly is right to remind us of that fact....But he's wrong to suggest that the network effect is the only or the most powerful means of achieving superior market share or profitability online or that it will be the defining formative factor for cloud computing. Hugh MacLeod is probably right that we will in time see a striking concentration of market power in the cloud computing industry, and the network effect probably won't have all that much to do with it.

I'm not writing this to be critical of O'Reilly, as I have a profound regard for his intellect and insight. I just feel that he sees too much in Web 2.0, and I'd be grateful for his next flash of insight. (Web 3.0?) The future of the Web will surely be shaped, in part, by those that harness collective intelligence and whose applications improve the more people use them, just as many businesses have grown offline (telecom, etc.). But as Carr indicates, this is just one element and not even the most important for many businesses.

Open source is not the answer to every question, either, though I believe it is a powerful answer to many questions. The same is true for O'Reilly's Web. 2.0. It is an exceptional explanation for how some businesses succeed online (and offline). But it is not The One Grand Answer for how to build an online business, as Google and others demonstrate.

Even some of Web 2.0's best case studies--Flickr, YouTube, etc.--have only proved that the winner tends to take all in online popularity contests, but that significant piles of cash may not always trail in the wake of that popularity. YouTube is a classic Web 2.0 company, but it's nothing to aspire to in terms of return on Google's $1 billion-plus investment.

For that, some good old-fashioned Web 1.0 may be important--you know, a business where you actually charge for products you deliver.