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Is Web 2.0 An Endangered Species?

Yesterday I read two articles that suggested Web 2.0 growth is stunted, if not actually in danger of stopping altogether.

Both cited a report from Dow Jones VentureSource. According to the report, even though nearly $1.34 billion was invested in 178 Web 2.0 deals last year, Facebook -- Land of the SuperPoke -- accounted for about 22% of them.

VentureSource's numbers also pointed to a slowdown in the growth of Web 2.0 deals.

During the period of 2002-06, deal flow doubled each year. However, 2007 saw a smaller percentage of deals -- an increase of only 25% (178 in 2007, up from 143 in 2006). To add fuel to the speculative fire, most of this growth took place outside of the Bay area, well-established home of Web-related investment and innovation.

Should Web 2.0 advocates, pundits, and prophets be worried?

Bloggers and analysts alike have been ringing the death knell of Web 2.0 almost since it was first christened. Sites like Twitter, Digg, and Facebook are often singled out for their success in driving traffic, but inability to make any real profit. Other critics offer more unique reasons for a possible Web 2.0 collapse.

Last year, Seth Porges at CrunchGear proposed that the weapon used to kill Web 2.0 would be none other than human laziness. After all, social networking sites only have value when they're updated (blogs posted to, pics from weekend getaways uploaded, and so on). Eventually the novelty wears off and the experience goes from enjoyable to feeling more like a chore.

Suddenly, there's a brand new social network with a cleaner interface and different features. Everyone's inviting one another to join it, and the previous community becomes a virtual ghost town.

It's that factoid, however, that makes me think Web 2.0 still has plenty of spark left. Web sites are just like organisms -- they're born, they grow, eventually they die. Out of their remains, life begins anew. As one commenter on Porges' article pointed out, users who give up their blogs and profiles are quickly replaced by new voices picking up where the previous ones left off. There's always someone who has something to say and thinks that their opinion is truly the most important one. Vanity, another commenter says, will ensure Web 2.0's continued existence for some time.

There's also the investment factor. Web 2.0 companies are still a cheap deal for venture capitalists. "The beauty of Web 2.0 companies is that they can do so much with so little," said Jessica Canning, director of global research for Dow Jones VentureSource. "A few million dollars and they're not only up and running but attracting eyeballs and advertisers."

That's not to say that Web 2.0 is invincible. With click-throughs for advertising dropping, sites are going to have to come up with new ways to bring the dollars in. Pay-for-play communities, anyone?

What do you think -- is Web 2.0 headed for the endangered species list? Or is there life left in this beast still? Tell us what you think.

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