Nothing lives on until you declare it dead: the web 2.0 case.

NASDAQ in Times Square, New York City.

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The comparison of the current financial crisis with the thirties is a commonplace for bloggers and mainstream media alike. Yet, extremely few, if any, of those making the comparison were born, lived through or near the time of the big crash in 1929. And as history teaches us that history does not teach people anything, the comparison of the current crisis to the 1929 one, is just a matter of impressions. We will not be able to know and understand the implication of the current crisis for years. Which is also a generous premise, since, even today, we do not understand the causes of 1929 crisis.

Another commonplace comparison is the one with the .com collapse. The parallels here run truly scarce, as very few of the  web 2.0 companies made it to the stock market to get exorbitant valuations. So where is the comparison? To the fact that the good times for web2.0, meaning capital flow, copycat financing, building a new venture in a matter of days, etc,  will eventually end. And  end it will, there is no doubt about it, since the melt down of the big financial corporations will dry up the rest of the economy.

Yet, like a forest fire that helps a forest regenerate, this dry up will put the vigor of web 2.0 into a test. And like in the .com era, Darwin will see himself proven right once more, and the fittest will survive.

I can’t help reminding myself of all the articles I read in the late ’90s that were doupting the prospect of Amazon‘s survival.  Amazon is now an undeniable e-commerce king. It has also  gone far beyond that, transforming itself into the main web services provider, the behemoth of cloud computing.

A similar thing will happen to web 2.0: the most valuable companies, those adept and well adapted, those with sound business models and practices will survive to see themselves the business royalty of tomorrow. The crisis may take away some money capital from them, but will also provide the with new cheap human capital, less competitors and a market that settles around them.

Is web 2.0 declared dead? Good! Now it can start living.

Reblog this post [with Zemanta] Is there a business model for federated microblogging?

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In the past two days a wind of optimism blows over the tech blogosphere:, the  microblogging service of Evan Prodromou, made  it’s debut,  throwing the dice for two very important issues: Scalability  and innovation.

Scalabitity has been tantalizing twitter to the point of causing a mass user exodus.

Twitter competitors (Pownce, Jaiku, Plurk etc) have not brought really important new features to microblogging. It is also  debateable whether the ones they brought have the power to attract some of the fleeing twitter users in the long run.

In contrast,, or rather, the underlying, the open source platform is built upon, has brought in the scence two things long desired and awaited: federation and open source.

Federation in microblogging means microblogging services ‘talking’ to each other, i.e. users of one service befriending or following users of another and vice versa. A federated microblogging ecosystem is the answer to the scalability issue.

Open source means innovation, means that now there is a platform the thousands of briliant developers around the world can peep into, in their free time, and contribute tons of new code and new ideas.

In the microblogging world to come, there will be no single big provider that dominates the game, but rather small or medium ones, spread all over the globe.

Yet, however appealing this vision might look, one has to think the mundane realities: how are these service provides going to make a living? In other words, what business model is appropriate for them?

Twitter has no business model. And so do many other web 2.0 ventures. As an answer to this, we hear pretty often that it does not need any. Once a sizable community is formed around twitter, the business model (or, rather, the advertsers) will follow.

The same line of thought cannot be applied to federated microblogging though. With practically not existent barriers of entry, new microblogging services can sprout like mushrooms everywhere, each attracting a small number of users and, therefore, never attaining the magnitute twitter aims for.

What are the options then? I would say only three, none looking  a really viable solution:

  • Charge for premium  services
  • Revenue sharing for SMS originated updates
  • Whatever ad revenue stream can be generated (i.e. adwords)

The first option should rather  not be  accounted for: extra storage or page customization or high profile accounts (: the model) are not a serious bait for users to spend their bucks.

Revenue from SMS updates,shared with the telcos, can be a serious source of income. Yet, the proliferation of smart phones and the affordability of data plans, will eclipse this kind of revenue in the near future.

Text and banner ads are gradually losing power. Yet, text adds for a text service sounds like the the appropriate ad type.

Banners are largely ignored, especially by  a crowd so diverse as  microblogging users, which cannot be targeted easily. Text analysis tools, that can extract meaninful information (like one’s preferences, buying patterns, spending power, age etc), need to be developed.  Such tools  would also need to perform their analysis throughout various microblogging services, and target users throughout  the microblogging ‘federation’.

How much ad revenue can make a microblogging service break even? Not too much, given the low setup and zero development costs. Even so, will it be  generated? It better be or the ‘federation’  will go bankrupt.


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