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A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
October 7th
, 2005


By Brent Holliday
Greenstone Venture Partners

 

Two Point Oh No

“Saw things so much clearer
once you, once you...
were in my rearviewmirror...”
Pearl Jam – Rearviewmirror

There’s a new hype sweeping the Internet.  No, wait.  There’s a new hype sweeping the investors looking to cash in on the Internet.  As with every hype bubble, if you are looking to cash in and are just learning of it now, you may have missed it entirely.  The bubble might be popping as we speak.

I’m talking about the idea of Web 2.0.  The O’Reilly sponsored conference of the same name wraps up today in California.  It was meant to be a gathering of the “geeks” that are using new technologies, and more importantly, integrated new technologies, to change how we see, use and get utility out of the Web.  As a developer of Web software, the concept of Web 2.0 goes a lot deeper with the “web as a platform” mantra allowing you to use others data and others use yours in a collective way.  Let Tim O’Reilly explain it better (O'Reilly: What Is Web 2.0), after all, he coined it.  Last year, the meeting was attended by 300 or so of these “geeks” who have since, it seems, all started blogs so that we can track their Web 2.0 thoughts.  This year, they capped the attendance at 800 and most of the new people were VCs, analysts and general hangers-on that all wanted to see Dick Hardt’s presentation (http://www.identity20.com/media/OSCON2005/)This is really presentation 2.0.

By the way, Yes, I do feel the irony of talking about Web 2.0 without a single mash-up or RSS feed from this column.  And there will be no trackbacks to me or from me.  I’m so Web 1.0!!! If labels are important to you, please leave now.

To get a sense of what I am talking about, just go to Emily Chang’s eHub (http://www.emilychang.com/go/ehub/) to see the myriad of Web 2.0 applications that have been made.  Interestingly, one of the senior members of the Web 2.0 literati is Flickr, Vancouver’s own photo tagging technology that Yahoo bought earlier this year.  The concept of tagging information to photos instead of creating a taxonomy for categorization is sooooo Web 2.0.

Now before you think I am mocking this revolution, let me get you some opinions from elsewhere in the blogosphere:

Rick Segal (http://ricksegal.typepad.com/pmv/) - “Enough already with this Web 2.0 nonsense. We are doing the same thing we always do when “new” has “newer” come along. We hype the snot out of it and crap all over the ‘old stuff’.

The modern version of a Tired vs. Wired chart is currently floating around the web. This attempt to categorize stuff as Web 1.0 vs. 2.0. is, well, interesting.

For example: Content Management is Web 1.0 while Wikis are Web 2.0. Gimmie a break. Wikis ARE content management dressed up a web service on top of a database engine that tracks content and, wait for it, changes to that content, in other words: Content management.”

Paul Kedrosky (http://paul.kedrosky.com) – “Can anyone point to a mash-up that they continue to use after the first “Whoa, cool!” moment? I use Paul Rademacher’s housing maps service now and then (mostly to cringe at the prices of homes here in La Jolla), but as near as I can figure, that’s the only mash-up I use. And as far as technologies go, the only so-called 2.0 technology that has really penetrated my daily work/play life is syndication feeds, which I have waxed about many times. So, does that mean Web 2.0 is a waste, a sexy phrase to suck in venture capitalists?”

As you travel around the blogs and run into Om Malik, Jonathan Schwarz, Larry Lessig and other huge fans of Web 2.0, you hear a few recurring themes about the promise of Web 2.0:

1)     It means the end of the desktop, essentially blurring the lines between on-line and off-line, finally (the software as a service promise).

2)     Through leveraging the work of other developers and your own users (collective intelligence) and building word-of-mouth through the connections created by these linkages, your costs of gaining critical mass are much lower than they used to be (the “long-tail” of interconnected smaller sites of content at work).

3)     Innovation comes from how you assemble all of the open-source, “lightweight” parts, not what software innovations you develop.  Further, your ability to constantly improve, monitor and support (i.e. operations) your software as a service will differentiate you.

So after swallowing all of the buzzwords in those themes, let’s see if I can validate any of them.

If Web 1.0 was the web page, then, yes I have to admit, Web 2.0 is the application that does not feel like it is inside a browser.  And through AJAX and other technologies that help the client end (Java Server Faces, Avalon) we will see the browser disappear altogether.  As I have already pointed out, this is not a revolution, but an evolution first envisioned in the late 1990’s when the limitations of HTML led to the development of better data models like XML and UI improvements that have steadily taken us towards a Windows like front end.  So, stop the heavy breathing, it is a mantra, but it always has been a mantra.

As for the lower start-up costs because of the leveraging of the user base as content providers and the other data sources provided by your developer brethren and their user base, I buy this.  Absolutely.  It is a shift that has been happening with the help of the Web 2.0 crowd.  It is a much better way to acquire a meaningful user base through useful applications, not branding through Super Bowl ads.  Hallelujah!  The end of the “first mover advantage” mantra and $50M financings of the “land grab” dot-com era! The gotcha here is that the pure Web 2.0 companies in the list at eHub are all cool things… but are they businesses.  Do they have a subscription model?  Can they be ad or targeted search supported?  In the consumer world, the applications with social interactions seem to be businesses, but they have to attract hundreds of thousands or even millions of users.  Some of the more obvious social interactions (Dating, photo sharing) are pretty crowded.  In the enterprise world, useful applications abound, especially in vertical industries or small business markets.

On the last theme, about how you innovate and differentiate in the new world, I completely buy this.  The shift in running a software as a service company is that you have to assemble your offering in a novel way and support the heck out of it.  Building on a scalable architecture for you back end and your data is critical.  You don’t want to be a victim of your own success and have traffic end up killing your capability.  Once more, this is an evolution of how we run businesses, not some breathless new world order.

We live in a cynical world, made even more cynical by the free and vast flow of information out there.  The hype of Web 2.0 had barely arrived (you can find very few references to the term prior to the summer of 2005), and already it is being assailed (again, irony.  Blogs are part of the Web 2.0 claim to fame and those blogs are killing the hype machine).  The thirst for a new new thing among the cash rich US VCs and the analysts that cover the public markets is huge.  They are longing for the days of 1999 and deals like Skype, $4B for $7M in 2005 revenue, make them fairly drool over the prospects again.  If you aren’t sure that Web 2.0 is a hype machine or you are one of the Web 2.0 elite that sneer at less intellectual folks, like VCs, I leave you with one last point (dagger?):

This week at Web 2.0 from True Believer Om Malik:

“Spotted Henry Blodgett and Mary Meeker. Add AOL buys something, and the Web 2.0 is truly over.”  Yup, Om, if Henry Blodgett, Mary Meeker and AOL are in the house, your time is up.

What Do You Think? Talk Back To Brent Holliday

 



Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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