Web 2.0 business modelsPosted by Richard MacMa…

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Web 2.0 business models

Posted by Richard MacManus @ 2:00 pm

Some interesting talk percolating around today about Web2.0 business models. Phil Wainewright has a couple of interesting postsabout what will happen in Web 3.0 (nb: one thing I know for certain isthat we won’t be calling it Web 3.0!). In his first post,Phil posits three main layers to what he terms Web 3.0: API Services isthe foundation layer, Aggregation Services is the middle layer, andApplication Services is the top layer. In a follow-up post,Phil wrote that the main issue of Web 2.0 is a lack of business models.He doesn’t believe advertising is a sustainable business model for mostcompanies. I agree with that and indeed it’s the main thing thatcritics of the Web 2.0 hype squark about: the lack of business models.

But there’s big money to be made in Web 2.0. As Dan Farber pointed out today,online classifieds is a potentially huge market that has piqued theinterest of Google, Yahoo, Microsoft, AOL and many other players:“According to JupiterResearch, U.S. online classifieds is forecast togrow from $2.6 billion in 2005 to over $4 billion in 2010.“

Goingback to Phil’s point about the layers of opportunity in Web 2.0 (andbeyond). Mashups is a current hot topic and many people are gettingexcited about the possibility of earning money by mashing up severalservices into one. I recently did a review of the top mashups on the Web today and was impressed by the quality and number of mashups and API services, from Virtual Places to mashingtonpost.com. But as Greg Linden pointed out today, the business model for mashups is still in question:

„Companiesoffer web services to get free ideas, exploit free R&D, anddiscover promising talent. That’s why the APIs are crippled withrestrictions like no more than N hits a day, no commercial use, and nouptime or quality guarantees. They offer the APIs so people can buildclever toys, the best of which the company will grab — thank youvery much — and develop further on their own.

There is no business model for mashups. If Web 2.0 really is just mashups, this is going to be one short revolution.“

Wisewords, but of course Web 2.0 isn’t just about mashups. There are manyother opportunities for web-based services that utilize aggregation,syndication, user content, and other characteristics of this era of theWeb. Ken Yarmoshhas taken a stab at defining Web 2.0 business models, putting companiesinto either of two buckets: technology-focused or networkeffects-focused. I’m not sure it’s necessarily either/or and I suspectthere are other types, along the lines Phil Wainewright has begun tooutline.

Whichever way you look at it, there are a lot moreopportunities on the Web now than there were even a couple of yearsago. This is the point that Web 2.0 critics and morons like theseoverlook. It’s all very well criticizing Web 2.0 and the hype aroundit, but what I find amazing is that the critics are using these verytechnologies to launch their attacks (blogs, syndication, user content,aggregation, etc). Business models? Still in flux, no doubt about it.But opportunities are out there.

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