Monday, December 18, 2006

Web 2.0 - Or 'The dotcom crash 2.0'

Google buys YouTube for $1.65bn
Rupert 'Beelzebub' Murdoch buys MySpace for $580 million
eBay buys Skype in $2.6bn deal, blogger, flickr, Picasa - were all bought previously by the same corporations, the difference here being the size of the recent deals.

I've been itching to write something about Web 2.0 because it's been infuriating me for so long. I've read lots of dreadful definitions of Web 2.0. none of them really cut if for me, so here's my own: Web 2.0 - Any website that is unusable on dial up. A lot of people like to put in some sort of social networking aspect, but really, I think that definition pretty much sums them all up. I can go and make a sandwich when I'm waiting for someone's MySpace page to load. That's if it doesn't a) crash my computer or b) plant spyware and steal all my passwords.

What prompted this piece were news reports emerging about Yahoo offering up $1bn for Nope, never heard of it either. Must be an American thing. Hilarity ensues when you read that they were turned down by the founder, Mark Zuckerberg.

Facebook board member Peter Thiel said last week: “The site's college-aged users make it worth $8 billion or more, as much as Viacom Inc.'s MTV music video channel," according to Bloomberg reports. from Zdnet

Worth $8bn with revenues estimated to be around $50m a year. Did I hear anyone say '3G Licences'? I say take the money and run kid, because mark my words, this bubble's going to burst within 12 months and you'll be kicking yourself. They may decide to go public which would be the beginning of the end really. All it takes is a battering in the markets for one major Web 2.0 player and the public are likely to stampede, much like they did in 2000.

One aspect of Web 2.0 that seems to get conveniently overlooked is that the sites mentioned above are all community driven. The huge sums involved in purchasing these sites is essentially to pay for someone's bright idea. Which is fair enough I suppose, some of those ideas are pretty smart and I certainly wish I'd had them. (Although back in 2000 I remember talking about movie rental downloads - which Lovefilm have just started doing. Damn you youthful apathy.) However, since all this content is user generated, shouldn't they get a slice of the pie? Hmm?

What if someone were to buy Wikipedia with it's millions of user written pages about Star Wars droids and it's constant disputes. Would it get divvyed up between all the contributors? Would it bollocks. Thankfully I think Wikipedia is safe, backed as it is by a charity, but if you've spent all day uploading videos to YouTube for the enjoyment of others, shouldn't you be rewarded for doing so? I reckon this might be the main cause for the bubble bursting, when you keep on giving and get nothing in return don't you eventually just give up?

Of course that's not even taking into account that the primary demographic for all this social networking Web 2.0 nonsense are aged 18-34, and have a notoriously short attention


Pete said...

Yeah, so there is an economic cycle and the effects of it are especially pronounced when new and important technologies are being adopted. We probably can expect a load of startups to fail and to see a lot of consolidation and crashes when the cycle swings, but that doesn't mean it won't be profitable to be involved and that there isn't real positive change taking place.

Despite the fact it's being bandied about by people with no clue and money to invest, web 2.0 isn't all smoke and mirrors. We now have almost two generations of people hooked on myspace and youtube using the web for all sorts of things. What's more, almost all of them have broadband internet accounts. If you revisit all the harebrained schemes from 1999 and factor in that they failed because the technologies, connectivity and users weren't ready for them, there are a stack of things that could work now. There are going to be a lot of ways for this huge new market of web users to interact with each other and for the people who own the applications they're using to cash in on those interactions.

What's more, if you go back and look at the major businesses like amazon, google, ebay and lastminute that came through the last bubble, it should be obvious that it actually did deliver a lot of what it promised. The businesses that managed to get the most users and hang on to them were the ones that were left standing, and that's part of the reason the web 2.0 companies in the pole positions are attracting such huge prices now. The reason you've not heard of Facebook is because membership was restricted mainly to US universities til pretty recently, but there are a shitload of people who spend a lot of time on it.

Will said...

But I think it's going to be a pretty agonising time for all those people not involved in the few companies that do make it. It just bugs me because it's an unnecessary hype cycle brought about by excessive media attention rather than real world economics.

Does Web 2.0 drive broadband growth, or is it the other way around? Is it just that the web has reached a point where most of it is inaccessible to dial up users so people have little choice? That's all well and good in the free world with our cheap 8mb broadband but what about towns that have to share a single ISDN line or satellite link?

I'm not trying to get all hippy but surely the web should be free and usable to all.

As an aside I'd like to kill the person that invented Flash.

Will said...

Ooo, look

12 months I tell ya, 12 months....

Pete said...

I don't think web 2.0 drives broadband uptake, so much as it capitalizes on the ubiquity of broadband that's sprung up since the first bubble burst. People have been using the web, and it's a self reinforcing network.

Forget the huge companies getting bought and sold, what's fascinating about social networks is that by enabling them you can place yourself as intermediary in all kinds of transactions (eg ebay) and you can now make a website turn a profit simply by selling advertising. A friend of mine is now making more than twice my income on google ads for his site.

So what's good about web 2.0 is that you can keep your overheads low, use your head and make buckets of money by providing something useful to people.