Kara Swisher created a little storm on TechMeme with a post called “Twitter, where no one knows your name“. In it she noted that no one really nows what Twitter (she asked a few friends). This created the usual river of replies. I liked the replies from Steven Hodson and Frederic at the Last Podcast best. The post isn’t a masterpiece of fundamental research, but Kara hits something that I have been thinking for quite a while now.
The web 2.0 industry, I thin we may call it an industry by now, is becoming a mature and therefore inert industry. The speed of innovation is dropping fast, just look at the number of truly innovating or new services you have seen the past few months. There are thousands of startups working on great idea. But most of these ideas are small improvements or tiny nuances in things that already exist. I tried to compile a list of services that fundamentally changed the way things work right now, but couldn’t make it a long list.
This is a pretty normal phenomenon. Someone starts the cycle with a great idea, starts killing the “old school” market leaders, and then others jump on the bandwagon and a new industry is born. This is a pretty healthy way of working.
The thing that I find interesting about this is that the web 2.0 industry differs a bit from that. I believe there is a web 2.0 industry (the massive amounts of people and companies working on it), but I am not so sure there is an equally large market. There are a few huge players making loads of revenues, but the rest is burning up venture capital. The web 2.0 industry in my opinion is by large a bubble that needs deflation pretty quickly. There are way too many startups working on the same ideas, the same services, the same small problems that need solving. Too many of these initiatives are based mostly upon technological capabilities, not so much on user value. It leads to an incredibly fragmented playing field where everyone tries to survive. And this whole thing is pretty much fueled by the Tech Blogosphere.
There isn’t a single day without “breaking news” or a “cool” new startup being mentioned on TechMeme, TechCrunch, or any other news source. Everyone, eager to be the first, jumps up to review and write about the next thing, which often turns out to be the same thing. Everyone copies the same stories, brings it as their own. It’s a death grip fueled by traffic, advertisement, personal glory, whatever.
It seems venture capitalists don’t know where to invest their money anymore. There is too much and at the same time not enough of it. We get all crazy about the next idea concerning video, pictures, social things, desktop air thingies, aggregators, aggregators of aggregators, which all ad up to the same “freemium” business model. Everyone looks at traffic (wow, Friendfeed just saw a huge spike last month), only to find that it is that same Tech circus creating that traffic. Most innovations don’t get to leave Silicon Valley. They start there, using the tech blogging elite to build up pressure and create the “aura of success”. But very few of them actually get to leave this bubble and conquer the rest of the world. Most of them remain in the bubble, buidling up pressure with traffic created by the Tech Elite. Never making a buck from a real customer outside this bubble.
And who is paying for all of this? To me it seems that the old industry ends up paying for this mess. Venture capital is used to take the risk, to create the pressure. But the main ingredient of most business plans isn’t customer value. It is getting prepared for a take-over. You can’t build an industry on that premise. If a company’s sole purpose is to get investment after investment in order to get sold at the highest bidder, then there isn’t any value created. There is only destruction. And the sucker that buys it last is the one that pays for the mess. Often old industry trying to become hip and cool in the new world, only to discover that they didn’t really understand this new world and bought something quite useless for too much money.
Does that mean that all efforts in this web 2.0 industry are futile, that if you are in a startup there isn’t value being created. Of course not. I’m pretty sure there are lots of great teams out there working their heads off to create the next miracle. But before you think about leveraging the Tech Elite Blogosphere for your own success you might want to think again. Getting into the web 2.0 bubble might be an easy thing to do. But the question is, who is going to let you back out into the real world and real customers? You might see lots of attention in the blogosphere, venture capital poured into you company, traffic spikes. But can you make it outgrow Silicon Valley? Can you break through the barriers of the web 2.0 industry and make the jump to the consumer or business market? Can you resist the tech blogosphere screaming hurray, or demanding new functionalities that any normal person would never need. I hope so. Because in the end, in the outside world is where the real value is being build. The rest of it is just a lot of money and hot air being pumped around the same isolated web 2.0 bubble.
Does anyone have a needle 😉
@vanelsas 
For me, Web 2.0 facilities are much more about building the ‘village’ of those with whom I will interact. At a person level, I want those facilities I use to continue.
At a trend level, as with all tech innovation, I see a little “gold rush” mentality in those who are offering these facilities for our use. So, I expect the majority of these services to cycle through initiation, innovation, production, and extinction.
Rodger
@Rodger That is a bit sad isn’t it? Extinction is so definite. But you are probably right about it
Alexander,
I do really appreciate your effort in making clear or trasparent that we have got an issue with this “Tech Elite”, could we say in some regard “Autoreferential Tech Elite”, made up mainly by tech people, VCs and tech analysts that’s trying to address their issues not user real issues .
There is a lot of public rethoric in this Tech Elite community about freedom, democratization of the information, community of interest, … but at the end, in private conversation, it boils down to money, sorry monetization, and in some case to easy money. I would not disregard the role of the Tech Analysts in this context.
@Pierro thanks for your input. I think you are right about that. There is in essence nothing wrong with earning a living. But for some reason the bubble is too self-containing, The money and opinions seem to be floating around it and hardly every breaking out. It’s almost a self perpetuating engine that keeps on moving, but really doesn’t go anywhere 😉
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I agree with many of the previous comments, and it would be logical that the innovation improves upon the old…even though the masses aren’t using all the latest doohickey gadgetry, it’s such a rich time of transformation. I do hope the competition will bring out the best evolution of services which ultimately will improve quality of life, because after all is said and done, you just want to get done what you need to do and spend the rest of the time enjoying quality time, right?
@irene true 😉
Hi Alexander. I both agree and disagree with your post. Yes, there is some bubble going on. Most startups won’t survive. But that’s a “natural” side-effect of the strive for innovation (or success). To me it’s an evolutionary process which needs offspring.
A big difference is that it’s visible thanks to TechCrunch and the like.
A jump in innovation will happen after current businesses have adjusted to what we call web2.0 now (which seems to change every week). Until then, the large crowds (users!) won’t be ready.
@Robert-Reinder you are right about the process itself, but in my opinion it’s not just become visible by TechCrunch and the like, it is actually fueled by them.
I think that as we move through the beta version of this information based revolution, the maturation of this industry will enlarge the spectrum of content beyond just the tech elite. Soon enough the tech savvy will trickle down their knowledge to the pro-sumers, and before you know it even people who still don’t know what a megapixel is will be digesting your news.
“Can you break through the barriers of the web 2.0 industry and make the jump to the consumer or business market?” Don’t worry. This is not Tech elite’s job. We, from the real business will take care of it. What do you think, why i am, real estate sales man, here?
i think you are confusing bubble with overdosis. there is no bubble and certainly no crash of the internet economy ahead. maybe a slow down. there are too many startups, and maybe too much money to fund them, but there is no risk of seeing the internet economy crashing. new initiatives (call is web 2.0 if you want) remain a minor part of the internet ecosystem. What matters is that the ecommerce and ad economy grows. this is what happens. this is what matters
@ravi, you must have gotten lost on your way 😉 But you are right of course.
@Ouriel I didn’t mean to use the term bubble in the sense of an “Economic (Internet) bubble” as was the case a few years ago. I meant it more to be a confined space, or a vacuum.
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