The Bankwatch

Tracking the consumer evolution of financial services

When will web 2.0 meet reality?

This is an important article in todays FT, that is summarised well in this first paragraph.

FT.com / Companies / Media & internet – Web 2.0 fails to produce cash

Many members of the Web 2.0 generation of internet companies have so far produced little in the way of revenue, despite bringing about some significant changes in online behaviour, according to some of the entrepreneurs and financiers behind the movement.

The idea of web 2.0 germinated shortly after the dot.com crash that happened in 1999 / 2000. Three things have happened since then, at the macro level:

  1. the rise of the social web
  2. the rise of new web based tools, and a shift away from PC based tools
  3. the rise of advertising as a model, with Google being the poster child

What is highlighted in the FT article is that web 2.0 has not produced any new business models of consequence. There has been talk to SaaS (Software as a Service) but so far just talk. It seems ludicrous to suggest that an entire economy would shift from a diversified revenue model to one of advertising, yet many web 2.0 guru’s still speak as if that day is coming. The consensus in Silicon Valley appears to be that advertsing is the only means of making money in the future.

Its time for a wake up call in terms of how web based companies and that includes Banks online, would make money in the ‘new economy’ if there is in fact such a thing. I know from personal experience with CommunityLend that building a service in that is web based, and that challenges the norms, requires to address regulatory needs for example, and it is hard work.

The article speaks about the expectation, espoused in the recent Charlene Li/ Josh Bernoff book, Groundswell, that the holy grail lies in making the connection between the social graph, and personalised advertising.

At the start of the decade, Google struggled to find a suitable way to
make money from search before alighting on the keyword advertising that
has underpinned its fortune. A similar hunt for forms of advertising
that suit the social media – where users want to engage with each
other, not corporate brands – has proved difficult. By common consent,
the key to commercial success lies in co-opting the crowd, though few
have so far succeeded.

A key hindrance to the above, is that people interact in social media because they want to not because they want to be advertised to. Back to the work at CommunityLend, making the link between social connections, and economics is complex, and introduces many nuances that have not been previously encountered. More to come on that.

Written by Colin Henderson

May 27, 2008 at 11:42

One Response

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  1. I really like this post.
    One thing that makes me think web 2.0 will be profitable one day is that when folks my age (20’s and 30’s) become SVP’s and C-level, then web 2.0 will be accepted by all generations…even the one’s with deep pockets. Then Software as a Service will work.

    Heath Stanley

    May 28, 2008 at 21:43


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