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“Almost every aspect of what we’re trying to do is changing in some way, shape, or form,” said Ray Ozzie, who’s famous in the software world for developing Lotus Notes and was recently named Microsoft’s newest chief technology officer.

Even basic desktop-software products such as Excel and Word, Ozzie said, would eventually take on many of the characteristics of today’s browser-based Web services. The company’s software will undergo “a steady migration” toward “user experiences using browsers, or using Internet-based services that are not running in the browser,” he said.

“If it takes very seamlessly weaving together software, hardware, and services in order to accomplish that experience, that’s what you’re going to find us doing,” Ozzie said.

Not everyone on stage at Web 2.0 bought into the idea, though, that browser-based software and user-generated content will rule the Web. Barry Diller, CEO of IAC/Interactive Corp. – which recently acquired the fourth-ranked search engine Ask Jeeves – had some stinging skepticism ready when Battelle asked him whether content such as blogs, photos, and videos would eventually overshadow big-media offerings on the Web.

“There may be audiences of eight to 12 people interested in somebody’s individual expressions, and more than that in some cases,” Diller replied. “But the truth is, that’s where editorship comes in. A process with people who have talent and expertise at making entertainment products is not going to be displaced by 18 million people coming up with their videos that are only entertaining because they’re awkward and stupid.”

Not every blogger can be a William Faulkner or an F. Scott Fitzgerald, of course, and many Internet fads burn out as quickly as they flame to life. What’s more, it’s standard practice for marketers to slap the “2.0” label on a product after even the most trivial upgrades.

But “Web 2.0” is one buzzword that seems to be sticking. Indeed, a Google search on it generates about 12.5 million citations. The phrase is now used daily by thousands of bloggers, entrepreneurs, and others to describe almost any change that makes the Web more interactive or participatory or upsets the business models of traditional software makers or entertainment companies.

Tim O’Reilly, founder of the Sebastopol, CA-based tech publishing house, has been using “Web 2.0” since mid-2004 to describe the evolution of the Web into a delivery mechanism for a range of media and software services – even programs that take over the typical duties of desktop software, such as e-mail and word processing.

The second Web 2.0 conference is clearly reaping the benefits of that buzz. With some 800 attendees squeezed into San Francisco’s Argent Hotel for the limited-registration meeting, it was about 100 more than last year, according to O’Reilly Media.

Many were managers and developers from small, recently-launched Web 2.0 startups, such as Bunchball, Flock, Joyent, Rollyo, Wink, and Zimbra. Because the software components behind the new generation of Web-based services are typically remixable, reusable, and open-source, it’s possible to assemble innovative services quickly and cheaply, Battelle and O’Reilly pointed out. Said Battelle, “People can start an interesting company with just a few people and not that much money.” 

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