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Is Web 2.0 Bogus as a Business Model?

For all of us who survived the exuberance of the dot-bombs era, a little blog entry by my friend, Randy Weber, entitled “Business Development 2.0 is BS 1.0 [1]” could serve as a nice dose of logic amid all the hype going on.

In his post, he lists out some salient points on why some of the Web 2.0 companies’ business plans are woefully lacking. It makes some sense. After all, if you’re sharing your core content and intellectual property (in the form of free apps), anyone can replicate your site, and they might just do it better than you, and you won’t see any of the money they’re making!

Web 2.0 maybe doesn’t have a simple definition [2] beyond “I know it when I experience it”, but at base it seems to be founded on user-generated content and syndication of that content along with application services. So, businesses based on Web 2.0 would seem to be counter-intuitive to the normal mechanics of classic biz, and those businesses founded on it might have a lot more risk associated with them.

I think there are just a few caveats to Randy’s post, though. Read on and I’ll explain.

 
There are lots of individuals who are getting rich in the short-term by putting together mashups of tons of free content married to Google Adsense or Yahoo advertisements. Will those thin affiliate sites (as Google likes to call them) survive long-term?  Probably not, but the people involved will still smile all the way to the bank in the meantime.

Another caveat are those sites/companies using Web 2.0 to get lots of little sites to connect up with them in some way. Using the medium as connective glue may help them build their Marketshare, and may help augment whatever their core business is. These days, internet market share may translate into overall marketshare.

Also, if you’re one of those lucky few Web 2.0 businesses that’s truly built something ingenious, you might get bought up by Yahoo! or someone else. (cases in point: Del.ici.us, Flickr, Konfabulator)

Finally, Web 2.0 offerings may be the make-or-break point for deciding ultimate long-term success between the major search engines or other major internet-based companies. I think it works very well for Yahoo!, since it allows them to get tons of people to integrate tightly with them, and that building-up of dependency will be hard to dislodge. Yahoo! is aggressively building out their APIs, and doing so with generous licensing.

But, Randy’s probably right in the vast majority of cases. Most folx can’t hope to be a Yahoo!, so businesses built on this will eventually fail. I just hope they enjoy the money in the meantime!