March 13, 2006 4:00 AM PST

Google deal highlights Web 2.0 boom

(continued from previous page)

Many Web companies are now publishing XML-based programming interfaces, which allows developers and, in some cases, end-users to combine information from different Web sites in "mashups." Popular mashups are those that let people take information, such as real estate listings, and display it on a mapping service, such as Google Maps or Virtual Earth.

The large number of Web 2.0 start-ups also reflects how small companies can get started relatively quickly and cheaply. Productive development tools and low overhead--in the form of relatively cheap hardware and open-source software--make launching a company without a lot of upfront investment more realistic, according to analysts and entrepreneurs.

"The problem is when you build to flip, you may be focused but shortsighted."
--Ross Mayfield, CEO, Socialtext

The business models used for Web-based applications generally focus on advertising or subscriptions.

Online productivity software company gOffice, for example, funds its free hosted applications with Google ads. Some analysts expect Google's Writely offering to introduce ads, much as its GMail service does.

Meanwhile, some companies, such as 37signals, seek monthly or annual subscription revenue.

Boom or bubble?
With the list of Web 2.0 companies growing daily, some question the long-term viability of these new ventures and whether a dot-com-like bubble is forming.

Ross Mayfield, CEO of social software company Socialtext, said that too many new start-ups are building themselves up to be acquired, or "flipped," rather than establishing themselves as companies that can go public and continue growing.

"The problem is when you build to flip, you may be focused but shortsighted. Essentially, you lose IPO (initial public offering) as the exit option, and M&A (merger and acquisition) opportunities you can't foresee," Mayfield wrote in a blog posting entitled "A Flip/Flop Bubble of Microventures?"

PC Forum 2006

Similarly, venture capitalist Peter Rip of Leapfrog Ventures said consumer mashups are intriguing and fun, but solid business models around the notion of sharing information are few and far between. "I see some real problems in turning mashups from an interesting parlor trick into a real business," Rip wrote in a blog.

Still, a number of small Web companies have been acquired over the past two years.

Yahoo bought photo-sharing site Flickr as well as Konfabulator, which makes desktop application "widgets," or add-ons. Google has bought several companies as well, including Blogger, photo-sharing company Picasa, and mapping company Keyhole.

RedMonk's O'Grady expects that many more Web 2.0 companies will need to be acquired, or they will simply burn out. That's because growing a hosted Web application beyond a few hundred, or even a few thousand, users requires substantial resources and technical expertise.

"To roll out a Web application to a wide audience, there is enormous difficulty scaling," O'Grady said. "The likes of Google and Yahoo have the sizable infrastructure and experience with scaling. When you combine that with the innovation at smaller shops, it's a pretty interesting combination."

Previous page
Page 1 | 2

See more CNET content tagged:
Writely, Web 2.0, word-processing, productivity-application, Web service

7 comments

Join the conversation!
Add your comment
Viva open source..
I guess all these applications would just be open source and available freely online..
More like the winamp from Nullsoft.
Posted by thedevilbegone (139 comments )
Reply Link Flag
One difference
The big difference is that the small web 2.0 companies don't get the crazy venture capital that happened the last time around
Some of them get purchased while they are still small (flikr, del.icio.us, etc etc)

<a class="jive-link-external" href="http://otherthingsnow.blogspot.com/" target="_newWindow">http://otherthingsnow.blogspot.com/</a>
Posted by SqlserverCode (165 comments )
Reply Link Flag
Bandwith, sure, but tech requirements?
&lt;hr&gt;RedMonk's O'Grady expects that many more Web 2.0 companies will need to be acquired, or they will simply burn out. That's because growing a hosted Web application beyond a few hundred, or even a few thousand, users requires substantial resources and technical expertise.&lt;/hr&gt;

So exactly how do the resource requirements change as your user base expands? Bandwidth, is all I can think of. That's cheap. Now what as far as the "technical expertise" requirements change as the user count grows?
Posted by locoHost (25 comments )
Reply Link Flag
Exciting!
these are exciting times for sure!!

what could possibly be more Boring than Microsoft Office!!

;))
Posted by BillyWarhol (12 comments )
Reply Link Flag
Web 2.0 Boom and The Year of Internet Video
Two quick comments. One is that any way you slice it, this is the year of Internet video, and I believe that the advertising, user engagement and content distribution goodness that Internet video will play in evolving old media to new media will be increasingly staggering as the year progresses.

To frame this one, a video clip sharing service like vSocial (which I am a cofounder of) is generating over 71M monthly pageviews, 270K unique daily visitors and serving up over 1.5M videos A DAY. That is almost 19 clips watched every second of the day, which speaks to engagement, reach and power of this platform.

Two is that the moral of the story behind the emergence of user-generated content services, such as vSocial, TypePad and Digg is that you can not "game" the process of deciding which content is conversational, what conversations are acceptable and where the conversations can occur.

Consumers will decided what is compelling, interesting and worthy of chit chat and do so at the virtual water cooler of their choosing.

The best smart content owners will be able to do is provide some kindling wood to encourage sparks of inspiration, but basically then get out of the way and allow consumers to do the talking (or not).

Understandably, this is at odds with the way media has traditionally worked, and there will be lots of fits and starts, but the emergence of the blogosphere where millions of bloggers excerpt and point back to original media articles in their posts, seems instructive of where all of this is headed.

Will be an interesting story to watch as it develops, to be sure.

Regards,

Mark Sigal
-----
vSocial: The Video Clip Sharing Community: www.vsocial.com
Tell stories, start conversations, extend the web -- with video
Posted by hypermark (43 comments )
Reply Link Flag
Hey Mark
Read your comment very well done- I'm the owner of xtme.net we are a media lending software system you can see some screenshots here <a class="jive-link-external" href="http://www.xtme.net/download.html" target="_newWindow">http://www.xtme.net/download.html</a>

We are looking for company's with content so we populate the software with content but also help promote your web site - if your interested hit me back @ matthew@xtme.net

Thanks!
Posted by xtme (4 comments )
Link Flag
Fun and Cool but Will It Fly?
I think Peter Rip summed it up nicely: "consumer mashups are intriguing and fun, but solid business models around the notion of sharing information are few and far between. I see some real problems in turning mashups from an interesting parlor trick into a real business [http://...|http://...]"

I have a hard time imagining the masses adopting this new breed of applications. First, it'll take a major shift in people's mentality for accepting to pay a monthly fee for a service instead of owning the software on his/her PC. Second, if the service is ads-based, then IMHO it will not work because people use the apps to get a job done in the first place -- people will not stop working and click on ads! Third, corporations will most likely be reluctant having their data reside on someone else's servers. (If the servers are on the customer's premises, then that's a different story.) Fourth, network outage! Already now, when that occurs, most people in my company can't continue working because emails don't work. Imagine what would happen to a web-services-centric company!

I think these web2.0 apps will simply become yet another nice and cool feature web giants such as Yahoo! and Google will offer to keep their general web-users base and attract new users, without having any expectation of generating significant revenue from them.
Posted by dysonl (151 comments )
Reply Link Flag
 

Join the conversation

Add your comment

The posting of advertisements, profanity, or personal attacks is prohibited. Click here to review our Terms of Use.

What's Hot

Discussions

Shared

RSS Feeds

Add headlines from CNET News to your homepage or feedreader.