25 January 2009

Do the web 2.0 communities remind any one else of the glory days of the wild dot-com boom (and bust?) of the early 2000s?

The communal web (isn't that redundant?) has inspired so many different applications that one wonders why any startup would want for a business model. Upstart and favorite Twitter just raised 250 million US through an unknown VC. Meebo went through similar rounds of funding a year ago. At the time, it was unclear what the business model behind the then naked/unadorned Ajax-powered IM client would be. Twitter, with a similarly large proliferation, faces the same question: what is the business model? Meebo.com solved the problem by adding advertising to its property, which works well because the property is what the users interact with. Twitter, I imagine, is something that people use from their cell phones, from desktop rich clients like Spaz and Twitterific, and so on. Twitter is the network, not the home page. I don't know - short of suffixing every 140 character update with an ad on all outbound messages – how they can monetize it.

But, as we've seen time and time again, if you build it, they will come. Or, they will build it on top of what you built. Or something. Twitter is valuable as it's become the standard bearer for any type of "status" requirement. Facebook, Plaxo.com, etc, all incorporate it. You can embed a Twitter status on your home page, should you like. It's become an platform for an essential part of a community: presence.

In the same vein, Facebook has become so menacing a threat to established giant MySpace by encouraging development on top of its platform, where MySpace had done everything possible to thwart it. MySpace failed to provide an API and a marketplace for such improvements. There were ambitious “hacks” that tried to integrate with the site, but were ceremonially squashed through MySpace's various “security” enhancements. This is the same tact that Microsoft took with Windows in its early growth: it made development on top of Windows a very cheap proposition and promised an entrenched market for those applications. Now a days it seems like Facebook integration's de rigueur, an absolute must for any application wishing to get off the ground and into the hands of a large audience quickly. There's also a cross pollination between larger apps, such as the one between the various applications on the Facebook platform itself and other standalone services, like Yelp.com, or the new Citysearch beta.

There's no way to monetize these integrations in of themselves except that they broaden the applicability of the application.

The iPhone has had a simialar effect; it's marketplace has birthed many different applications that have been carried to exorbitant levels of profitability simply by being accessible to the audience that the iPhone application marketplace carries with it. Witness: the iFart application.

This all makes me wonder: are we seeing another dot-com boom? Do these new folksonomy-based applications rely on a quality that isn't by itself profitable and achieve profitability solely through VC investment?