All said, the 2.0 industry maturity threshold is quickly being attained, and can be detected in 2 observations:

1 – the building blocks are becoming modularized – in any engineering discipline, modularization is a sign of maturity.
2 – the consumer pricing is tending to zero – in a multi-player market, low or zero price to the consumer means that its adoption, sponsor participation, scale and production efficiencies have reach a level where delivery can be sustained to the consumer at zero cost.

The funny thing is I think that a lot of premium services are doing the best. Networks that are closed and require high monthly fees to be part of something ultra exclusive. They don’t have nearly as many members but the members are a lot more focused and involved. Maybe that’s the way these things will end up. Pay for the best parts or use pieces of them for free.

The hard thing for most folks to realize is that bleeding edge users (i.e. geeks) are the ones that generally get these services rolling. This same group is almost impossible to monetize into a valid business plan.

The Web 2.0 stars you mention will not have valid business plans until they go mainstream. Creating a business model that is built on the backs of early adopters is almost assuredly doomed to fail. Of the ones you mention, which have any hope of breaking into the mainstream?

• Digg = no chance.
• Facebook = maybe, but not in its current configuration.
• Twitter = maybe, but only if it can morph into something that the general user can understand and find useful.

Google works because casual web users (read- my Mom and Dad) can understand it and finds it useful. You want to build something for the web that will make money? Target the mainstream, not early adopters.

David
@dcanfield

I agree with Jared in the sense that web 2.0 companies that require subscription but have a focussed, dedicated group of users will have better sustainability and do better in the long run than organisations like Digg and Facebook who require round after round of funding.

Bob

The problem with many web companies is that their MBA teams want to position on growth rather than profits.

If Facebook worried about revenue, it would have a greater chance of pissing off its users. Right now they are all working on the drug dealer model and trying to get the web hooked on their services.

This is not even the beginning of social services on the web. Facebook, Google, and MySpace are more akin to Microsoft, Apple, and IBM than you might think. Try to imagine where the web will be when the social web has had twenty years to write software and integrate code into other parts of your life.

I am telling you its just begun.

I believe that the internet is still very young and the advertising market has come to maturity because people think old school. Contextual and behavioral are old stories, yet advertising remain a necessity. We might see very soon new business models popping-up that will this time revolve around a change in the way we perceive and experience advertising.

I’m sick of hearing the argument that "if they charge then someone else will simply replicate the platform because it’s so cheap to construct". Your piece does an excellent job of highlighting how expensive these platforms are to run once they reach critical mass.

Concentrate on building features/functionality that are worth paying for.

Well.. something tells me we’ll be around much longer then most of them.. and I wouldn’t be surprised to see all the VCs come knocking on our door again soon.

Thanks for the article… good stuff.

You may think that Offerpal, RockYou, Flickr and 37signals are great companies, but I have seen no evidence than any of them is making a significant amount of money (i.e upwards of $50-$100 million/year). I’m most familiar with Flickr and I’m sure subscriptions produce decent revenue but it has done little for Yahoo in the overall scheme of things and in the photo space, it still has relatively limited market share.

Nonetheless, if Web 2.0 proponents are going to hold out a handful of companies that actually have non-negligible revenue (and might even turn a small profit), they can’t ignore the legions of Web 2.0 startups that don’t, including quite a few that raised more than enough capital to give it a go.

Facebook and MySpace are nothing like Microsoft, Apple and IBM. While I won’t belittle what it takes to keep massively popular websites like Facebook and MySpace running, Microsoft, Apple and IBM produce real technologies that individuals and businesses actually pay money for.

As for your statement, “Try to imagine where the web will be when the social web has had twenty years to write software and integrate code into other parts of your life,” I’d point out that a viable consumer Internet has existed for barely more than 10 years. Think of how much has changed over that period of time. Do you really believe we’re capable of predicting what it’ll look like in 20 years?

This is just the beginning. But the “social web” isn’t the be all and end all. It’s but one fork on the chart of the Internet’s evolution and if in 20 years we’re still talking about Facebook and MySpace, that won’t be a good thing. Do you wish that Geocities was still top of mind in 2009? Didn’t think so.

Finally, if you think that code gets integrated into people’s lives, I think you need to spend more time outside. Code is code.

Its not about control, but its about relationships, connections, and content. News corp has been around for a Long Time and it will be around for a long time.

Microsoft was and is working on ‘Social Tech’ as part of its future business plan. The whole idea of buying Groove Networks should point to that. Also watch how the CEO’s get pushed around at MS in the next 2 years.

One could argue that the reason that the Xbox is beating the ps3 is because of web 2 stuff. I happen to know that Microsoft’s Xbox team seems to get it better than most of the rest of the company and they are getting moderate awards from the consumers for it too. Look at the Zune, same group, great innovation but in the example of MS Z1 was a test, Z2 got better acceptance, and Z3 will be a force to reckon with. Microsoft entered the console war with Dreamcast and the 360 is so much farther along.

Microsoft is getting into the enterprise social market, they almost bought Xobni, and they are working on a project called TownHall.

I would like to see IBM buy Yahoo, its good for the web, and if the two companies do what I think they would with such a merger, it will create a nice triangle of competition between MS, Google and IBM.

The Enterprise will get social in a big way.

You will also see your car, cell phone, and your home getting social.

Social tech like pandora, prosper, and ycombinator are only in their infancy.

Things are changing in a big way, but it’s hard to see when you are looking at facebook, twitter, and digg as market leaders. All of these companies are funded by VC’s that want a big payout rather than looking at value, time and how they affect peoples lives.

Heck Virgin Money has a better shot at doing something interesting than Facebook. Facebook is such an ivory tower that they can not accept where their current value is.

Companies that have Good cash flow and innovation now WILL out pace companies that are taking their time at revenue.