March 13, 2006 4:00 AM PST
Google deal highlights Web 2.0 boom
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The Web search giant last Thursday confirmed it had bought Upstartle, which produces the hosted word-processing service Writely.
Though a small purchase--Upstartle employed only a handful of people--Google's move is significant because it further highlights the company's interest in Web-based productivity applications, which could be considered an online alternative to Microsoft's dominant Office desktop software.
It's hard to pinpoint which Web start-ups could be bought next. But analysts and entrepreneurs expect Google and competitors like Yahoo, America Online and Microsoft's MSN unit to continue scooping up smaller, niche companies and products to fill out their offerings.
"The general pattern is that big companies let the other companies do the innovations for them," said RedMonk analyst Stephen O'Grady. "Smaller companies can do innovation in a more agile fashion outside the boundaries of a large company, and they get acquired."
The deal has also rekindled speculation over Google's future plans. Observers note that a document-creation service like Writely could complement a Google project called GDrive to provide online storage.
The company has not explicitly said what it intends to do with the Writely service, one of a growing number of services often grouped under the Web 2.0 moniker.
Though it lacks a precise definition, Web 2.0 generally refers to Web services that let people collaborate and share information online. In contrast to the first generation of Web offerings, Web 2.0 applications are more interactive, giving people an experience more akin to a native desktop application as opposed to a static Web page.
In the area of Web applications, the last two years have seen an explosion in Web services aimed at consumers or small businesses. These services, many of which are still in beta, span many areas and companies. Here's a sampling:
Why the sudden boom in Web 2.0 companies? There are a few reasons, both technical and business related, say investors and analysts.
More people have high-speed Internet connections, making applications such as photo, music and video sharing feasible. The underlying software to build Web services is being upgraded as well, lowering technical barriers that existed only two years ago.
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