credibility

This page considers the 'newness' and commercial credibility of 'Web 2.0'.

It covers -

• introduction - 10 assertions by a Web 2.0 booster
• networks - the same infrastructure as in 2001
• investment - fewer frills doesn't mean more startups and fewer burnouts
• experience - lessons from the first web bubble?
• orientation - the web is more than a business exercise
• conclusion - a new web bubble rather than a new web?

     introduction

During 2006 UK private equity group 3i announced "ten key differences between Web 1.0 and Web 2.0".

Those differences were -

1. Widespread broadband connectivity - Dial-up is rapidly being replaced by broadband while GPRS phones and Wi-Fi hotspots provide faster, mobile connectivity.
2. Open Standards base - Makes connectivity between services more reliable and simpler to build and will help to ensure best effort security.
3. Friendlier development environments - New environments like AJAX are young but hold the promise of being easier to use. Java J2EE and Microsoft .NET environments required substantial programming skills.
4. Less investment required - Open standards and simpler development means that companies can be created without massive investment. More companies can be incubated to spread the risk and riskier ventures can be left to prove themselves before adoption.
5. Wider innovation opportunities - The de-skilling of the technological requirements and resulting reduction in start-up overheads opens the door to innovation as more people realise they can take a DIY approach.
6. Change in emphasis - The basis is shifting to business use rather than Tim Berners Lee's original research collaboration goals.
7. Better browsers - Support for new formats, such as RSS and faster graphics processors, enriches the user experience.
8. Device proliferation - Convergence of mobile phone capabilities and PDA functionality supports more frequent use of services on demand.
9. Greater awareness of challenges - Service providers outage problems and natural disasters like the New Orleans floods have raised awareness of the need for redundancy and resilience.
10. Lessons from history - The maturity of the developing commercial Web has refined how services are developing built on the successes and failures of the past.

A sceptic, as we have indicated in the preceding page of this note, might say that those points sound distinctly traditional. 3i comments that

The first Web bubble popped because, like most bubbles, it contained little more than hot air. The initial wave of speculators had no idea what a Web economy should look like, but everyone believed unshakably that this would be the next big thing ...

The truth is that, from a business perspective, Web 1.0 was not a great success. Like early version software, Web 1.0 was riddled with bugs, short on genuinely useful features, and prone to frequent crashes. Some of this was the fault of early Web service providers, but a lot of it was simply down to the prevalence of bad software.

and

Any company taking advantage of these channels can immediately accelerate their customer service reactivity and modify their delivery systems in a more agile way.

Some of the Web 2.0 claims by 3i and its peers are laughable. Others are simply wrong (or non-sequiturs used to bulk-up a list to the canonical ten points for a powerpoint presentation).

     networks

Is Web 2.0 based on new infrastructure: cables, switches and servers that are distinct from those of 1997 or 2001?

In reality the answer is no. There has been no revolution in the type of infrastructure or the communication standards used to deliver content to most of the online population. It is difficult to justify a claim that 'Web 2.0' networks are substantially different from those in 2005, 2001 or 1998. Potential development of networks, using mechanisms such as piconets, IPv6 and ENUM, are discussed in the following page of this note.

The "device proliferation" referred to by 3i has not in fact been reflected in a substantial shift in patterns of use.

Many people in advanced economies have acquired 3G mobile phones. They are not however making extensive use of many features of those devices. For much of the population the mobile remains a tool for voice calls, SMS and taking (but not exchanging) the occasional photo. There is little web surfing from mobile phones and less commercial video access.

Questions about "the need for redundancy and resilience" remain deeply traditional. They are not unique to web services or to broader use of the net and were not remarkably highlighted by events such as Cyclone Katrina. Resilience is a basic concern for telecommunication providers. A sceptic might add that the residents of New Orleans had other - and on occasion somewhat more important - things to think about other than accessing their blogs, YouTube or Amazon.com.

     investment

In discussing the 1990s web bubble we have suggested elsewhere on this site that irrational exuberance about e-businesses and connectivity providers was attributable to low interest rates, behavioural finance and hype by journalists and business promoters.

It is difficult to disagree with 3i's assessment that Web 1.0 popped because investors realised that it contained a lot of hot air. It is also difficult to discern why Web 2.0 is much different.

Speculators continue to have "no idea" of what a "Web economy should look like" - although it would be more accurate to say that there is a continuing difference between what a "Web economy" does look like and what, according to the pundits, it should look like. In 2000 "everyone believed unshakably that this would be the next big thing" - in 2006 enthusiasts are just as unshakably committed to beliefs about Web 2.0 but sceptics get better media coverage in questioning buzzwords such as folksonomies and user-generated content.

It is difiicult to discern why "less investment" is required for e-commerce in Web 2.0. To the extent that "companies can be created without massive investment" is true, that does not differ from Web 1.0.

From an investment perspective Web 2.0 is a repeat of Web 1.0 but without the Aeron chairs: investors have realised that it is more useful to invest in hardware (and appropriate support systems) than to waste money on elaborate fitouts and caviar for creatives. Starting an e-business now is not necessarily cheaper: investors instead are merely more selective. Among small and midrange investors there is more interest in realistic business plans, although perceptions of credibility have shifted.

A contrarian view would be that it is clear some dot-coms were underfunded, on the basis that being online would somehow allow them to "immediately accelerate" acquisition and retention of market share without substantial costs.

     experience

Claims that Web 1.0 was uniquely characterised by the "prevalence of bad software" and was accordingly not a "great success" from a "business perspective" are problematical. It is unclear why Web 2.0 is different or that internet software prior to 2005 was indeed "bad".

Claims that there are "wider innovation opportunities" and that "de-skilling ... opens the door to innovation" through a DIY approach are equally problematical. One e-business lesson over the past decade is that economies of scale can matter and that amateurism - mixing DIY, dreams and enthusiasm - often does not work. We see a shift away from DIY, with both public and private sector organisations instead recognising the importance of professionalism in planning and delivery.

The "lessons from history" do not substantiate woolly claims from pundits, e-business agencies within government and journalists

     orientation 

Web 2.0 supposedly embodies a "change in emphasis", a "shift to business use" rather than research goals. The notion of Web 1.0 as based on research and Web 2.0 as based on business is disingenous, ignoring substantial investment over the past decade and the pronouncements of e-business promoters.

It would be more accurate to characterise the net (and the web) as embodying a range of uses that encompass academic and commercial research, messaging by businesses and families, publishing by government agencies and civil society organisations, retailing by businesses and user-generated content that underpins revenue generation through advertising and other functions.    

Will "taking advantage" of Web 2.0 allow "any company" to "immediately accelerate their customer service reactivity"? Our response would be that "reactivity" is perhaps a tad more complicated.

The claim by 3i is simply a repetition of the e-business mantra promoted in Web 1.0 texts such as Evans & Wurster's Blown To Bits: How the New Economics of Information Transforms Strategy, The One Minute Internet Manager and Canter & Siegel's How to Make a Fortune on the Information Superhighway or self-consciously Web 2.0 texts such as Wikinomics: How Mass Collaboration Changes Everything (New York: Portfolio 2007) by Don Tapscott & Anthony Williams. The latter reissues the command to "Forget everything you know about the way we do business", this time because "Mass collaboration" (rather than the net) "is revolutionizing the corporation, the economy, and nearly every aspect of management".

     conclusion 

Preceding paragraphs have indicated that there are no radical discontinuities between what has been characterised as Web 1.0 and Web 2.0.

In terms of technology and use there is little to differentiate the net of 2000 (or 1997) in advanced economies from the net of 2006. Attributes such as user-generated content, author-friendly software, experimentation (often disappointing) with new delivery mechanisms, recurrent discovery of the next 'new new thing' and angst about impediments to pervasive access are evident from the mid-1990s and indeed - as highlighted in discussion of usenet and cyber-utopians - predate the web.

There are substantial similarities in pre-2001 and post-bubble business models (or at least the claims by pundits, journalists and financiers). Contrary to claims by boosters such as 3i, economic fundamentals for 'web' businesses have not changed. To the extent that the tagline 'Web 2.0' has meaning (rather than being an interchangeable label to convey hipness) it signifies a new web bubble rather a new web.

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