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Wednesday, April 12, 2006 Web 2.0's Startup FeverSoftware toolkits and cheap hardware have led to the comeback of the garage startup. But this time the boom is more rational. By Wade Roush
If you're Web-literate, you can organize more and more of your life around Web-based tools and services given away by a host of young startups. You can keep your social calendar at Eventful or Upcoming, organize your to-do items at Gootodo, store a gigabyte's worth of documents at Box.net, read the news (or write your own) at Newsvine, find hours of video entertainment at YouTube or JumpCut, create and share Web bookmarks at Diigo, create podcasts and audio memos at Odeo, publish blogs at Wordpress or Xanga, and share your photos at Flickr or Buzznet -- or Riya or Bubbleshare or Zooomr. All for free. And that's just the beginning of the list. This explosion of new Web sites -- a phenomenon often dubbed "Web 2.0" -- is great for all kinds of Internet users. But how long can this new crop of startups survive without charging for their products? The answer, in some cases, may be not long. Simply put, many of these outfits, much like their dot-com predecessors in the late 1990s, don't have business models. The most common revenue source in the Web 2.0 world is contextual advertising -- but, as some analysts point out, the nickels and dimes earned when visitors click on ads provided by the likes of Google's AdWords barely bring in enough to cover the costs of Web server hardware. Consequently, some industry watchers believe that a shakeout is likely within the next 12 to 24 months. The winnowing of Web 2.0 won't be as bloody as the dot-com crash of 2000-2001, though, simply because these companies never accepted much venture funding and have far fewer employees. What's more, the underlying technologies won't disappear -- more likely, failing companies will be bought up by slightly larger competitors in a wave of consolidation. Nevertheless, there are simply too many new Web-based software services -- 300 and counting, according to some analysts -- chasing too few users for all of them to prosper, say observers such as Rafat Ali, editor and publisher of digital-media news site PaidContent.org. "Will 90 percent of these companies be around two years from now? Probably not," he says. "Everybody knows that, because we've been through that once before. But at least there are germs of innovation, which the bigger companies can take in." The oversupply of Web 2.0 startups is partly due to the much lower overhead needed to sustain a modern Web business. Innovations such as Ruby on Rails, a software toolkit for building database-backed websites using AJAX (Asynchronous Javascript and XML) interfaces that resemble sophisticated desktop applications, make it easy for a small team of programmers to build advanced Web-based services, while the costs of Web server hardware and Internet bandwidth continue to drop. "Way too many startups are created each day, because the barrier has been lowered to a bare minimum," says Jeff Clavier, managing partner at SoftTech Venture Consulting, a Palo Alto, CA, firm that works with early-stage startups. "Anybody who has the money to rent a server for $100-200 per month can actually write a Web 2.0 application, put it up, start sharing, and make a name for themselves. So there is not a dot-com type bubble, but there is a 'geek founding' bubble."
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Cheap Infrastructure
04/23/2008
Massachusetts Institute of Technology
Comments
Guest (Ben Curtis) on 04/12/2006 at 12:00 AM
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Guest (Sacha) on 04/18/2006 at 12:00 AM
1
What would be the advantages and disadvantages of positioning SMS as alternative revenue stream instead of 'contextual advertising' for a lot of Web 2.0 business models. Anyone?
Guest (Michael D. Donahoe) on 05/02/2006 at 12:00 AM
1
I think there is a pertinet point to be made that there are some amazing strides in the open source community being made. I've recently switched to Linux on my laptop now that applications are getting richer...finally.
Guest (Wade Roush) on 04/13/2006 at 12:00 AM
1
Ko on 03/04/2007 at 7:53 AM
2
I'm a TV producer and researcher. I'm super interested in the article THE INTERNET IS BROKEN. I know I'm on the wrong page, but Michael, you seem tech savvy.
Here's what I need, I need heroes, rescuers, IT saviours. I can't go into details but I'm trying to put together a team of specialists to help a media company get rid of this horrific virus (they say it comes from Romania). CNN was infected with it too.
Check HERALD TRIBUNE at: http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070302/BREAKING/70302006&start=1
"March 02. 2007 12:08PM - Computer virus hits Herald-Tribune
By TODD RUGER
todd.ruger@heraldtribune.com
SARASOTA — A computer virus spreading through business systems this week has hindered several media outlets, including the Sarasota Herald-Tribune.
The newspaper’s production equipment was affected Thursday night, forcing the newspaper to print Friday’s editions without several of its local news, sports and editorial pages. The technical problems also caused papers to be delivered late.
Media reports from across the country show similar problems occurred at a dozen media outlets, including Turner Broadcasting, owner of cable news channel CNN, McClatchy-owned newspapers and the Minneapolis Star-Tribune.
The culprit is the latest version of an old computer virus, RINBOT.L. It is not specifically targeted to attack media outlets, but it cripples Internet and e-mail communications."
Contrary to the journalist, I think it does target mainstream media outlets. It looks like a group of hackers are terrorising the MEDIA by trying to shut it down. We don't see that kind of thing on You Tube.
Anyway, this major media conglomerate is PARALYSED by the virus. IT'S A HUGE PROBLEM.
Please reply if you know who the best IT virus repairperson is. I will forward my email to this person, once that person is found. Just for the record, the media conglomerate has hired the best of the best IT specialists. And it’s still CRIPPLED.
This is a serious question. I will also try to get in touch with David D. Clark but am not sure he's the right person for this problem. We sort of need a special team, sort of a swat team, a guerrilla team made of hackers themselves, engineers, internet architects, internet researchers. etc.
An executive (NOT IN IT) from the company mentioned changing the OS from windows to Mac but somehow I have a feeling it wouldn't solve our problems. Would Linux be a valuable solution Michael?
Anyway, this is a long comment, I’ll give more details and be less confidential if someone replies to me.
Thank you,
Ko (k.ouimet@koandco.tv)
From Montreal and Toronto
PS: I just want to be the go-between. I’ll forward people’s name to IT Director and it’s between you and them. The company is Canadian.