The signs of Web 2.0 are clear. Look for some aspect of community collaboration, of user-generated content, of the ability to customise the content, of a desktop-like application experience. But why exactly should we care? In the words of a BusinessWeek headline on June 5, 2006, why is that “Web 2.0 Has Corporate America Spinning�
Users benefit in multiple ways. They are empowered, with an internet that they choose and have, in part, created. The content they read and write is about what interests them rather than what a publisher thinks might interest them. They get cheaper access to applications. They are able to participate in and create a social network with like-minded people that may not exist in their day-to-day lives.
Businesses can benefit in similar ways. Many Web 2.0 services have specific business purposes. Startup 37Signals sells online collaboration services specifically designed to allow geographically remote teams to manage projects and agendas. Business documents and handbooks are recreated as Wiki’s (the information structure program used by Wikipedia). BusinessWeek reports that “Dresdner Kleinwort Wasserstein uses a Socialtext wiki instead of e-mail to create meeting agendas and post training videos for new hires. Six months after launching it, traffic on the 2,000-page wiki, used by a quarter of the bank’s workforce, already has surpassed that of the company’s intranetâ€.
Maintaining and developing contacts can be achieved through services like LinkedIn (www.linkedin.com, a ‘grown-up’ version of MySpace). Businesses can also add to or replace some of their PR activity with corporate blogs. Erstwhile Microsoft blogger, the gracious and disingenuous Robert Scoble has arguably done more to soften its image than any of their PR activity over the last few years (http://scobleizer.wordpress.com).
For publishers, the Web 2.0 approach clearly makes for an attractive business model. Having created a platform like digg.com, ongoing costs are fairly minimal for a news site, with no reporters, no editors, and no production people. They have to pay for the bandwidth and some programmers to tinker with the platform to keep it working satisfactorily. Their revenue comes from targeted avdertising such as Google AdWords (more of which anon) and since we, the users, decide what appears on the front page, these advertisements will be very accurately targeted to what the digg community is interested in.
It is not surprising, then, that the promise of a successful Web 2.0 site has the business community excited and that VC funding and angel investment is coming back to the internet. News International’s acquisition of social networking site MySpace for $580mn in July 2005 has been the largest deal so far, but it is one of hundreds of deals.In most cases, the amounts aren’t astounding. Luckily for investors, with the low-cost business models these startups have adopted and users driven as much by word-of-mouth as traditional advertising, there isn’t actually a need for vast amounts of capital in many cases. There’s certainly no return to the frenzy of 2000 when, for example, pets.com, which sold pet food online, raised $82.5mn in an IPO before collapsing nine months later. But they are interesting nonetheless.
Communal video sharing site youtube attracted $5mn from Sequoia Capital in October 2005, while digg got $2.8mn. Online calendar service trumba attracted $8mn in November 2005 from three investment companies. Zimbra, an online equivalent to Microsoft Outlook, raised $16mn. Facebook, a college networking site, raised $12.2mn. The list goes on, most amounts are undisclosed, but a glance at the portfolio pages of VC companies like Union Square Ventures, the Omidyar Network and Selby Venture Partners confirms that confidence is high.
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