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2008 will be remembered as the year of Web 2.0, but perhaps for the wrong reasons. Once again we’re entering the tail end of an economic cycle, however this time round, the culprit has noting to do with the Internet. Web 2.0 has indeed been a thrilling ride, and personally I have gained much, as most evident in the upkeep of this site. Looking back, what are the lessons we have learned from this period of history? Was Web 2.0 a dud?

THE PROMISE

The promise was simple. The Web 2.0 era will bring about sweeping changes to the way we live, play, and work. The first salvo was fired by blogs, podcast, and videoblogging, which are “creating” in nature (Contents are created from scratch). At its peak, it seems as though everyone from the age of 12 – 60 was either creating their own blog, starting their own radio talkshow, or showing the world “how to be an idiot”. However, where have all these taken us? Majority of these “innovators” (they are actually the early majority) were just riding the wave of “popular culture” and have since left the scene once they realize that there’s no real incentives for them to carry on.

I think I belong to the somewhere between the border of early adopter and early majority.

After these early majority left the “self publishing scene” came another wave: Social Media, or as I would like to put it, Crowdsourcing. There are differing views as to what social media constitute, however I like to see it in this way: “The person on the ground knows best”. Social media strives in four areas, namely: Knowledge Retention, Citizen Journalism, Social Networking, and Shrinking Supply Chain.

• Knowledge Retention – Noting better illustrates this then Wikipedia. Simply put, the world have not seen or heard about any thing like this before 2001, but now it has become an integral part of every knowledge base worker.
• Citizen Journalism – Iraq, Tibet, Natural disasters or anything that’s grassroots / scandalous, Citizen Journalism brings a global audience to local or inconvenient truths.
• Social Networking – Who cares whether you’re a friend of my friend or a 3rd degree friend? Now people do as Social networking has introduced these terms to a new generations of youths. “Friends” have taken on a whole new meaning.
• Shrinking Supply Chain – This may be new to some of you as it’s not what the average web user thinks about. However, crowdsourcing has the potential to redefine a global supply chain, in particular outsourcing. When you think of e-commerce such as ebay and Amazon, it is in fact a form of crowdsourced trading, in which the buyer gets to choose from the best priced item within all the ebay sellers. All the sellers are in fact participants in the crowdsourcing of goods which the buyer is interested in. (This point deserves its own write up to better illustrate the concept, but in the meantime you might want to check this out.)

This second wave of Web 2.0 optimism is still ongoing, but contrary to popular believe, this wave of “innovation” is participative in nature, not “creating” (You don’t create anything new. Just “be there”). The bulk of the content creation can safely be attributed to the Pareto principle, more commonly known as the 80/20  theory, although I think even this ratio is being very optimistic.

And then someone introduced the “Cloud”. Perhaps realizing that consumer interest in Web 2.0 cannot substantiate a viable business model, people started shifting their focus to the corporations and coined the term, Business 2.0. There are again differing views on what defines business 2.0, but this is merely market segmentation and the different positioning strategies the vendors chose to take up in selling their products and services. There are two main proponents of business 2.0, and I classify them into software and hardware. The software promise is to integrate popular Web 2.0 concepts to the business environment, targeted mainly at improving human efficiencies thereby leading to increased productivity of the workers. The hardware promise is to move the organization infrastructure to the cloud, eliminating geographical limitations, improving business process, and ultimately reducing operating cost. (Hope to do a writeup on Business 2.0 in future to reveal the truth)

THE REALITY

In understanding what actually happened, we need to look at the Web 2.0 as an independent industry to better illustrate why it has it taken the path it took, what stage it’s currently at, and what might be in store for future. Note that it’s totally biased to my thoughts.

Introduction

When Web 2.0 first came up, only the innovators and early adopters (a.k.a Geeks) were playing with it. Market size was too small, profits not substantial to justify any big investments. Most Web 2.0 companies did not operate with profit in mind, but rather to fulfill a need. Mainstream media had not pick up the “buzz”.

Growth

The buzz was getting stronger, proving too much for the media to ignore. Terms such as Blogging, Podcasting, and Videoblogging started to appear in online articles. The early adopters started moving in and created many interesting contents and saw the growth potential of the industry. Many ended up starting their own companies that are primarily profit driven, with the aim of catching the attention of the big boys. The drive to succeed by many of these profit driven companies raised the buzz level by several notches, resulting in increased media coverage, from online articles, to traditional media like print and TV. Several leading companies were acquire by big corporations due to their “first mover advantage”, and the big corporations started developing their own alternatives.

Towards the later stages of growth, the early majority moved in and basked in the attention created by the media. Many still tried to startup their own company, but the market was starting to saturate. Clones started to appear and the “garage millionaire” mentality spreads. “The sky’s the limit”.

Maturity

By this time, the late majority emerges to see what this is really all about. This group forms the largest user base and have largely no business interest and are looking for pragmatic ways in which Web 2.0 can help with their lives. The industry focus shifted from content centric, to participative centric in order to more actively engage this large group of user base, and this was when social networking took center stage. In the meantime, the user base had gotten so large that even big corporations with little or no interest in this industry were forced to take precautionary measures by restricting their competitors growth to protect their own interest, or risked losing market share. The buying spree started, and many instant millionaires were born.

The intense buying spree filtered their way into the mainstream business news, and the laggards took notice. This group are made up of business decision makers, and they are extremely pragmatic, demanding results over promises. At this stage, many of the early majority with millionaire dreams felt the heat of intense competition within the industry, and started to reposition themselves to another market segment, namely business 2.0.

Decline

We are currently at, or about to enter this stage. Many of the late majority are questioning the usefulness of Web 2.0 applications as they see no real world benefits. The market has become extremely saturated, causing many companies to quit. The big corporations had consolidated their position in the industry, and less acquisitions are taking place, with mergers becoming commonplace which ultimately lead to user disruption thus creating negative publicity for the industry. Profits and growth of many companies in the industry has slowed or remain flat due to the saturated user base. As a result, many are actively pushing for the development of the business 2.0 market in order to tap on the laggards. Majority of the pioneer innovators are happy with the reduced “noise” in the industry, bringing them out again to do what they do best, innovate, and thereby lying the seeds of foundation of the next development cycle.

Towards the end of the cycle, more consolidation will take place due to lower demand, with only the “franchise” among the commoditized Web 2.0 services surviving the decline. Driven by need to justify their purchase, big corporations will have to seek more returns from their investment to please their shareholders, and will go all out to develop new market segments, and business 2.0 will take off.

CONCLUSION

Not all is gloomy as this is the law of economics. At the end of every cycle, we lay the seeds for the next boom. In the last dot.com burst, the seeds planted were that of underground fibre optics cable, which is INTEGRAL to the development of Web 2.0. These cables gave assurance to the Web 2.0 boom as bandwidth cost was never a concern, and people were free to innovate without restrictions with regards to bandwidth.

So what were the seeds planted at the end of the Web 2.0 cycle. If I have to choose one, it is Crowdsourcing. Crowdsourcing has got to be one of the most important discoveries of the 21st century, as it taps not on technology, but on the inert potential of every human being. Its is a systematic approach to building knowledge / development of solutions, akin to compound interest in the accumulation of wealth. If Albert Einstein calls compound interest the 8th Wonder, I declare Crowdsource the 9th Wonder.

So what’s after Web 2.0? My logic tells me this:

Web 1.0 provided the bandwidth for Web 2.0 Crowdsourcing to be viable. Web 3.0 will produce the mechanism to filter / prioritize / optimize the massive amount data, before Web 4.0 integrates it into an automated system to study / analyze / replicate human behaviors / emotion, finally leading to Artificial Intelligence.

I hope to live long enough to see this…… Credit to http://www.valuebasedmanagement.net for the illustration