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Archive for July 23rd, 2008

The Advertising-Based Web 2.0 World is Losing Its Anti-Gravity Ray Too

Posted by Bob Warfield on July 23, 2008

I wrote recently that Google is losing its Anti-Gravity Ray.  By this I don’t mean that Google is by any means over, merely that it will increasingly have to obey the ordinary laws of physics and deal with delivering real financial results that include a close focus on profitability and not just growth.  It’s not a harsh sentence at all, rather it is what the vast majority of public companies deal with every day, and Google certainly has the momentum and wherewithal to be right at the top of that heap.

Today I read a post by New York VC and famous blogger Fred Wilson, which directed me to a post by his VC partner Brad Burnham.  Fred describes Burnham as, “the big thinker at our firm.”  In addition to talking about a new investment in startup Meetup, Brad lays out some very significant changes in the firm’s thinking about where to invest.  In essence, he is signalling that the Anti-Gravity Ray for Web 2.0 startups may be weakening.  It will no longer be sufficient to drive traffic at any cost and hope to monetize that traffic at a later date using advertising.  There is concern in the VC circles that the pure Web 2.0 game may be about over:

Something is changing on the web. We have lost some of the giddy enthusiasm that has surrounded the web since 2004. It was then that Tim O’Reilly defined Web 2.0 as a platform that leveraged collective intelligence. There is still a ton of interest this idea, but many of the recent conversations we have had about the web are colored by concern.

We’re at that “What comes next?” stage of consolidation.  “What comes next?” will be the next period of punctuated equilibrium as the innovation world oscillates from innovation to consolidation and back again. 

Meanwhile it may not be a good idea to be too focused on more of the same.  As Brad puts it:

Two things will need to happen if the recent pace of innovation on the web is going to be sustained over the next few years. The next generation of services will need to have an impact on the real world and the real economy, not just an attention economy driven by self expression and discovery online. These new services will also need to reach real people, many of who use few if any web services today.

Burnham clearly wants to see the Web 2.0 world much more firmly engage with the real world by producing real revenues driven by a willingness by customers to pay real cash presumably because a real problem is being solved for them.

I wrote recently about this with respect to Communities on the Web for Business.  A recent study commissioned by Deloitte has shown a tendency for these communities to fail to reach anything like critical mass.  The reason, I believe, is that they aren’t grounded in solving a real problem for people.  Rather, they attempt to solve a problem for the business.  At my company, Helpstream, we are focused on solving real problems for real people with Web 2.0 and Communities.  That’s the biggest reason why I joined, together with the awesome team and the product that team has put together.

The web brings us two things:  lots of choices and a short attention span.  Those two things and the musings of these VC’s, when tTaken together, this means that if you don’t solve a real problem with your Web 2.0 technology, you probably won’t succeed.  Businesses, in particular, need to focus on solving real problems for their customers with these technologies because they typically need to show results much faster than startups, particularly in this economy.

Posted in saas, strategy, Web 2.0 | 3 Comments »

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