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The Financial Times had an interesting article this morning which suggests that Web 2.0 has substantial problems with generating revenue. I’m not sure that this news is much of a shocker given the increased discussion recently about revenue generating businesses. Another highlight of t
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1 year ago
Many Web 1.0 managed to gain revenue traction. Web 2.0 will also.
The differences today though are worth noting. In 2000 the web was essentially a medium for communications and information exchange. Transactions were just emerging.
Today, we have an enhanced capability as a communications platform (FB, MySpace), transactions are evolving towards services and we can now overlay content distribution and creation. It is a much broader set of addressable opportunities.
Secondly, the quality of consumer technology is now at a standard similiar to or better than enterprise level. So, cost of deployment is far less.
I think the future is pretty bright. The Valley is usually early and in this case probably right.
1 year ago
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1 year ago
Great discussion. My personal take is that we will see a "flight to quality" in the Web 2.0 space. I believe we're already seeing that in fact, with VCs starting to let some companies fail.
There are some fundamental differences from the late 90's:
- Cost of Web 2.0 is quite a bit cheaper than Web 1.0. With the free LAMP stack (do you know any startups that are buying Sun hardware, Oracle databases, or iplanet web servers?), the cost of software infrastructure has come down by an order of magnitude.
- With offshoring, the cost of software development has come down by 50%.
- With the rise of standards on the web and many free web services, the cost of development a useful item, whether it's a product or a feature, has also dropped substantially.
- At the same time, there are many more ways to see if a prototype can quickly get to scale. You have the likes of facebook, myspace, and other platforms that let companies develop a prototype for hundreds of thousands of dollars or less and see if it can gain millions of users.
As a result of all of this, VCs can de-risk a venture investment in a lot less time and for a lot less money than in the Web 1.0 cycle. This means a broader portfolio of investments and more experimentation, with the ability to focus Series B/C/D investments on the ones that show real traction, promise, and revenue.
- Rajeev Goel