Investor's Business Daily, June 1st, 2007
In the early years of the Internet, circa 1990-2000, budding entrepreneurs would stake out a category, fortress it and hope Web users would flock to the site.
"The metrics then were grab land and eyeballs," said Peter Rip of venture capital investment firm Crosslink Capital.
Amazon staked a claim to online book sales, eBay took the auction route and Google put its stamp on search.
Like the California gold rush, some people got rich but many didn't. The Internet boom fueled the largest rise and sharpest fall on the tech-laden Nasdaq.
From the rubble of the dot-bomb of 2000 emerged a more vibrant free-range Internet that has come to be called Web 2.0.
The terms that define Web 2.0 are gobbledygook to the non-techie. They include wikis, mashups and tagging. Simply put, Web 2.0 is the global community of 200 million Web users with a broadband connection who have become participants rather than passive observers.
The new Web is open territory, cheap to buy and easy to traverse.
"It's no longer a land grab, because the Web is now infinite," said Rip. "It used to be expensive to start a Web company. You bought an Oracle database and servers from Sun."
That's old news. "The cost of starting a company is very low. The cost of bandwidth is down by a factor of 50, the cost of hardware is down by a factor of 10, and so much open-source software is free," said Rip. Put it all together and "anyone seemingly technical can put their dreams and aspirations into a Web site."
Many have; 1,253 Web 2.0 firms exist, says Go2Web20.net, which dubs itself "The complete Web 2.0 directory."
Then there are Web logs -- people's musings and reports. Blogs have been around since Web 1.0. The phrase was coined in 1999 when blogs were mostly textual.
In the Web 2.0 world, blogs and Web 2.0 sites are loaded with images, sound, video and links to other blog sites. More than 70 million blogs have been logged by Technorati, although most pass by like gnats in the night. And though just fractions gain widespread recognition, 22 of the top 100 most popular Web sites are blogs, says Technorati.
When it comes to Web 2.0, says Technorati founder David Sifrey, blogging was the earliest indicator of the simplicity of creating a Web site. Blogging also demonstrated the power of the Web. Bloggers have swayed the mainstream media, influenced buying decisions, made stars out of nobodies and destroyed careers. In short, John and Jane Doe took charge. "The person formally known as the audience is now a producer, a creator and a participant," said Sifrey.
Case in point 19 the classic Web 2.0 site, Wikipedia.com. It's a free online dictionary that ranks in the top 10 most-visited Web sites, right alongside Google GOOG, Yahoo YHOO and AOL.
That's a heady feat for a company that does not post advertisements and has less than a dozen full-time staffers. Most of its operating revenue comes from small donations by Wikipedia users.
Those users helped make Wikipedia famous. An army of Wikipedia volunteers has written, edited and posted over 5 million dictionary definitions in multiple languages covering everything from aardvarks to zoology. Wikipedia has blown the doors off Britannica and Microsoft's Encarta online encyclopedia.
Perhaps the hottest Web 2.0 site these days is MySpace.com. It's the community where people go to define who they are, what they like, socialize and size up profiles of other people. More than 100 million people have profiles on the site, which is owned by News Corp. NWS.
And YouTube.com, the video-sharing site, is popular enough to deliver knockout blows to politicians caught on tape doing or saying something silly.
What many Web 2.0 sites share is users who upload content that complements what's already there.
"Wikipedia, YouTube, MySpace and Facebook are all great examples of companies and communities that have grown up around the user," said Sifrey.
Such an evolution led Time magazine to name You as Person of the Year in 2006.
Web 2.0's popularity grew so fast, businesses woke up late. They finally heard the alarm when business models were disrupted, such as what's happened to newspapers.
"Business use of Web 2.0 is almost entirely untapped," Sifrey said.
Now tap is more than a drip.
"With all the news about Web 2.0 in the past year, it's hit the radar of chief executives," said Oliver Young, an analyst at Forrester Research. "They want to jump on this because they fear if they don't, they will lose ground to competitors."
Procter & Gamble PG is using Web 2.0 technology for product development at InnoCentive.com. P&G wants 50% of its innovation this year to come from outside the firm, by soliciting the entire community of scientists for assistance.
Nike NKE created a site where people can upload a map of favorite places to jog and what music they listen to when running. The site can also be used for runners to connect with other like-minded runners.
Mattel MAT recently got into the act with Barbie.com, a social networking site starring its main doll.
Then there's Wal-Mart WMT. It launched a social networking site, then shut it down less than a year later as the site gained a reputation for more hype than substance.
"A lot of these experiments will be trial and error, hit and miss," Sifrey said. "They have to be careful about creating hype. At the same time, it's obvious there are a number of significant and dramatic shifts that Web 2.0 technology is facilitating."
