The phrase Web 2.0 seems like it has been around for the longest time, however, in many ways, Web 2.0 is still in its infancy. In fact, as a business model, many Web 2.0 companies are still working on developing ways to generate revenue, much less turn a profit.
With so many popular Web 2.0 applications out there–Twitter is often used as the quintessential example–there seems to be a dearth of ways to actually make money from these great ideas. The knee-jerk reaction to this concept ranges from skepticism bred by the initial dot-com bubble of 1999 to optimism that every good and popular idea has fantastic potential when coupled with the proper business plan. Reality probably falls somewhere in the middle.
A recent article in the Financial Times studied the lack of cash-generating Web 2.0 firms. Unlike the situation of 1999, the article mentions that the economic downturn in the US has been a significant obstacle to the ability of Web 2.0 firms to generate revenue which contrasts greatly with the sanguine atmosphere preceding the 1999 bubble. Additionally, the inability to generate revenue is now seen as a real problem for Web 2.0 firms, rather than a pesky snag that will probably work itself out later. These two major shifts are making success a difficult brass ring to reach for Web 2.0 firms that have exploded in almost every way imaginable–hits, users, notoriety, etc.–except for in the one way that matters most, namely: revenue.
All is not lost, though, all you believers in Web 2.0 and its potential applications in the business world. In the article, Devin Wenig, head of the markets division of Thomson Reuters offered this truism, “The Valley is usually right, and it’s usually early.” Good ideas have merit and, therefore, worth. Sure, the days may be behind us when a company like Twitter could garner a multi-billion dollar buyout, but that doesn’t mean that it is worthless just because revenue generation has alluded it so far. In my opinion, figuring out how to monetize a site like Twitter would be as amazing a breakthrough as the idea for Twitter itself. It will be a challenge, but one that is far from impossible and certainly one worthy of pursuit.