Business & Finance
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7/21/2006
05:30 PM
Rob Preston
Rob Preston
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Down To Business: Web 2.0 Not A Game-Changer--Yet

Show us the money--the long-term viability. Then we'll get on board.

When does a boom become a bubble? When the valuations of the companies under scrutiny far exceed the potential of their products to generate revenue and profits. When the language used to describe those companies and products bloviates beyond a layman's comprehension.

Online communities such as MySpace, for which Rupert Murdoch's News Corp. paid $580 million, aren't just gathering places for like-minded people; they're new paradigms for harnessing collective intelligence. Blog sites aren't just forums for pundits to pop off; they represent a new information delivery, advertising, and value chain. Ajax, a collection of techniques used by Google and others to develop nifty interactive Web applications, is a platform, a business model, nay, a force for economic change!

Coursing through the veins of this Web 2.0 movement is the same narcotic hyperbole that drove Web 1.0 over a cliff. InformationWeek has covered Web 2.0 technologies in depth, and our parent company, CMP Technology, runs the annual Web 2.0 conference with O'Reilly Media and has even registered the Web 2.0 term as a service mark. So we have plenty riding on the euphoria. But we realize that this movement has legs only so long as its practical applications start measuring up to the hype, a healthy skepticism that's apparent in our stories and conference agenda.

The spreadsheet, e-mail, the Web itself: Now those were killer apps. Many of today's Web 2.0 innovations are more ornery than lethal. In a recent blog, Dallas Mavericks owner Mark Cuban, a dot-com billionaire who bailed at the peak of Web 1.0 (and hedged his stock riches thereafter), laments that there's nothing much truly new with the second rev. "Not as exciting as going from DOS to Windows. Not by a long shot," he writes. "Heck, it's not as exciting as going from WordStar and all its keyboard combinations to WordStar 2000 was." As for broadband Internet access, the same DSL and cable speeds have ruled for years. The plummeting prices of PCs, servers, storage, memory, and backbone bandwidth have made it easier for Web 2.0 startups to get in the game, but cheaper infrastructure doesn't always spark ingenuity.

There's also a big difference between a cultural phenom and a game changer. Granted, MySpace is now one of the most popular sites, representing 4.5% of all U.S. Web visits, according to metrics company Hitwise, but its community functionality isn't exactly revolutionary. (That's the whole point! the Web 2.0 junkies will yell--its simplicity lets the user call the shots.) Still, Murdoch and crew haven't yet figured out how to monetize all that traffic.

Meantime, hundreds of other sites are trying to apply the MySpace magic to business communities. Will a bunch of winners shake out? You bet. But until these companies can show consistent profits, they're just clever contraptions. It's a leap most Web 2.0 companies still must make.

Yet for all the hoopla, this isn't the dot-com bubble all over again. Venture capital money isn't nearly as loose as it was six years ago. Acquisition activity isn't as frenetic and initial public offerings are almost nonexistent. Stock prices and IT spending are more subdued.

In terms of game-changing Web developments, none is more intriguing than software-as-a-service, with its potential to disrupt how companies build, buy, distribute, manage, and upgrade their critical applications. Salesforce.com already has proved it to be a commercially viable model, and the vendor's AppExchange, bringing together developers, partners, and customers, may just herald the future of the software industry. The wireless Web is still a huge opportunity for vendors and business users alike. And even if the business Internet is boring, the consumer Internet is anything but, with social networks, video sharing, and interactive gaming leading the charge.

But show us the money--the long-term viability. Until then, forgive us for keeping our heads on straight.

Rob Preston,
VP/EDITOR IN CHIEF
rpreston@cmp.com


To find out more about Rob Preston, please visit his page.

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