In 2005, Rupert Murdoch bought the marquee Web 2.0 business MySpace for $580 million. A year later, the price for a piece of settled Web 2.0 real estate had apparently tripled, as Google paid $1.65 billion for YouTube.
The fact that, in response to legal challenges that seem to bring into question the viability and even legality of the whole YouTube video-sharing business model, YouTube immediately began shutting down a large number of its video feeds, well, that has to raise some questions about the wisdom of the Google-YouTube deal, as well as of the whole Web 2.0 phenomenon. And the fact that one of the YouTube challenges came from Comedy Central, which has benefited greatly from the viral video phenomenon that is YouTube, puts yet another weird twist in the economics and sociology of Web 2.0.
Shall we also mention that the staid news service Reuters has set up a bureau office in the Web 2.0 virtual world Second Life, and is paying to staff it and to rent (or is it lease?) office space in that virtual world? Or that Sun Microsystems chose Second Life as the venue for a recent press conference? Or that Web 2.0 venture Digg is being called the "new Slashdot," or that—here's a scary thought—Web 2.0 venture Wikipedia, a user-editable encyclopedia, is often the first and sometimes the only place many people look for information on—pretty much anything?
You Know You're a Web 2.0 Business If...
These are just a few recent blips on the Web 2.0 radar screen, but perhaps they make the point that Web 2.0 is catching the imagination of present-day Web denizens in a big way, at the same time as they demonstrate that the Web 2.0 concept is a little confusing. In a recent oreillynet.com article, Tim O'Reilly tried to clear up some of that confusion by presenting a "meme map" of over a dozen attributes (symptoms?) of Web 2.0-ness, including such memes as architecture of participation, users as contributors, functions not predetermined but emerging from use, getting better as more users use it, harnessing of collective intelligence, trust of and amongst users, sharing reviews and opinions and contacts, tagging, and reputation. Ultimately, Tim's brave effort still leaves Web 2.0 a very porous concept.
But an important one. We'll focus here on a more close-knit topic and its role in Web 2.0 ventures—trust. Trust is always important in business, but it is basic to all these Web 2.0 projects in a way that it wasn't to earlier Internet businesses. And not all Web 2.0 ventures are alike: The way in which trust matters in Web 2.0 ventures differs for different kinds of business models. Then there's the matter of the engineering of trust, which is hardly a new idea, but deserves particular attention in the development of Web 2.0 enterprises.
It's not surprising that trust should be so important in Web 2.0 ventures, because most of Web 2.0 seems to be about the development of online communities. Jon Udell said recently, "The Web began as, and keeps proving to be, an experience that's more about social interaction than passive entertainment." Web 2.0 companies are, by and large, those that embrace this idea of social interaction at their cores.
We need some more examples to clarify what we're talking about. One thing that complicates the Web 2.0 concept, though, is that in talking about it, you really can't leave out 1.0-generation businesses like eBay and Amazon. But the kind of businesses we're talking about here include businesses explicitly built around models that are richly social: MySpace, Facebook, Friendster, and virtual worlds like Second Life, Active Worlds, and Entropia. We're also talking about media-centric ventures such as YouTube, Flickr, NetFlix, MusicMatch, and PhotoBucket, which depend wholly on user contributions or build value from user ratings or recommendations. These ventures call to mind early peer-to-peer music-sharing systems, but somehow avoid most (if not all) of the controversy and threats of legal action. In all cases, there seems to be a community at the heart of the business model.
