Implosion 2.0

Don’t look now but 2008 is poised to be the year of the Web2.0 implosion. In brief, consumer confidence is low, retailers are projecting a slow holiday season, Web2.0 is all about advertising… this all leads to one big crash. (Ok, actually, I believe it’s going to be a relatively soft landing in mid-late 2008, but crash just sounds better. Besides, if I didn’t join the hype, I wouldn’t be able to link to this terrific video.)

Retailers have been running scared this entire holiday season. The first Xmas advertisement appeared just a week after Labor Day! The first special holiday season sales were held the weekend after Halloween! Even with Black Friday (the day after Thanksgiving), retailers reported a slow start to this shopping season. And the latest sign is that 8 Macy’s stores in New York stayed open around-the-clock from December 21 through Xmas Eve. Other retailers were holding 64-hour sales hoping that last minute shoppers would save the season.

I think it’s time that we all accept it, with the subprime mortgage problems and the staggering increase in the number of defaults on credit cards, the consumer has carried the economy as long as he/she could. And, the companies that will pay the most are going to be Web2.0 ventures.

What’s scary about Web2.0 is the homogeneity of business models across all companies. Everyone is fighting for advertising dollars. Web2.0 is, more or less, all about user-generated content. This euphemism just means that a few intelligent people built some cool new tools that all the rest of us use to fill the internet ether with our opinions without having to know any of that technical stuff. And, because the typical person has been spoiled with free access to more and more online, it’s just not possible to get end-users (you and me) to pay for these tools. As a consequence, people just won’t pay to produce (which they never should be asked to do) or consume content. So, everyone is jumping on the advertising bandwagon.

Haven’t we seen this all before? Now we’re talking about “unique visitors per month” and “duration of page views”. This sounds like the old “eyeballs” metrics from the dot-com days, doesn’t it? Wikis are the new newsgroups, Blogs are the new personal websites, Social Networks are the new Web Portals: Facebook = Yahoo, Wikipedia = Usenet, WordPress = Geocities, Yelp = CitySearch, MyPunchbowl = Evite, Viewpoints = Epinions, Glam = iVillage.

This raises the question: Can’t anyone actually sell anything anymore? And, unfortunately, the answer is: We don’t know, because nobody’s even trying. An unfortunate rule of all economic belt-tightening is that the marketing budget is the first one cut. As a consequence, those companies that rely on advertising revenue are hurt the worst.

Just as the dot-com bust helped us figure out the right number of online pet stores, Implosion 2.0 will trim the number of social networks and useless Facebook widget builders. And that’s not a bad thing! Everyone’s gotten fat and lazy off of advertising for too long now, and it’s time for entrepreneurs to innovate around other business models.

Web-IV convergence: social networks and applications

The news is coming fast and furious. I thought the dot-com boom was life at Internet speed, but this is ridiculous. It wasn’t all that long ago that Web2.0 was just a bunch of WYSIWYG tools to ease development of web content. In that respect, Web2.0 did for the Internet what Microsoft Word did for computer word processing. (Think back in horror to the days of color-coded key combinations for document formatting with the old WordPerfect.) That is, Web2.0 made it easy for anyone to publish content to the web.

It was only a few short months ago, on May 24, 2007, that Facebook led the next evolution and brought applications to the masses by introducing the Facebook Platform. Web-IV is the ultimate convergence, and this was one of the defining events in taking us from Web2.0 to Web-IV. Think about it, until this point, Web2.0 gave people easy ways to produce content (blogs, wikis) and to aggregate content (mashups). But May 24th marked the day that interactive, feature-rich applications were elevated to that same social status. It became simple for anyone (with just a little technical know-how) to build an application and have it immediately used by the ready and eager masses.

That was ground-shaking, earth-shattering, sea-changing. But, alas, that was sooooo May. Now Google and its posse are riding out trying to tame the wild west of social networking with OpenSocial. And, it’s so much more than just a common technology for developing applications on social networks. Lost in all the coverage is the fact that this is the first significant move to finally, finally bring all the social networks together.

I fully expect OpenSocial to, first and foremost, provide a “single sign-on” level of interoperability to the social networking space. I would be shocked if one of the first applications developed on OpenSocial wasn’t some way to better share information and connections across the various social networks. It’s inevitable.

The natural course of all communications networks have followed the same path. One need only review the history of the telephone industry to understand the phenomenon. First, there are a lot of small network providers, who all fight really hard to protect their “walled gardens.” But, as Metcalf’s Law explains, the value of a network grows as the square of the number of nodes in the network. So, after a while, a small number of dominant players emerge and gobble up all the smaller networks.

So now the question becomes, will Google become the Ma Bell of social networking in our new Web-IV world?

Apple has seen the light

Wow! Who woulda thunk it? A tiger can change its stripes.

Apple has announced that it is opening the iPhone and iTouch to third-party applications. Yes, believe it. This is the same company that lost the PC wars to Microsoft and Intel because it refused to allow the Mac to be cloned or to license the Mac OS. This is the same company that only allowed iTunes songs to play on the iPod and only allowed the iPod to play songs bought through iTunes (or open source MP3 files). And, this is the same company that released a software patch and turned any “unlocked” (read: hacked) iPhones into useless bricks.

Suddenly, Apple has reversed itself on over 20 years of business strategy. Steve Jobs has all but admitted that that business strategy was wrong. The poster child for tight control has seen the light of open-market economics.

Why now? Why has Steve Jobs had this epiphany at this particular time? Two reasons: Facebook and MySpace. That’s right, Apple didn’t learn from the Mac debacle in its own history. Apple is reacting to what’s happening in the Web 2.0 world right now. And, the analogy is an apt one. Apple sees that Facebook is rapidly gaining on MySpace and that the reason for it is that Facebook opened its platform to third-party application developers. MySpace got so scared by Facebook’s growth that they could only counter by opening up their platform as well.

Apple understands that to maintain its position atop the cell phone world it has to do more. Other manufacturers are introducing touch-screen cell phones. The iPhone runs the risk of being just another handset in a crowded market. So, Apple pulled out its trump card, the one thing that Apple has that no other handset manufacturer has: the upper hand in the handset manufacturer / wireless carrier relationship. Through its deal with AT&T, Apple secured the power of self-determination. And, contrary to what both parties must have believed at the time, Apple decided to share that power with the rest of the world.

But, does Apple understand the ramifications of this decision? This has done so much more than just open up a platform for developers. What Apple has done will send shock waves throughout the wireless industry. By striking the iPhone deal with AT&T, Apple put a chink in the armor of the wireless carriers. Before that agreement, the carriers maintained a stranglehold on the device manufacturers and forced them to comply with a telephone-book sized list of requirements and constraints. The chink in the armor was that Apple negotiated the power to control the device, and even forced the carrier to create service plans specifically for their device.

By opening the iPhone platform to third-party developers, Apple has not only set the device manufacturers free from the carrier’s control, but has also now ushered in the age of Wireless Net Neutrality. Since all iPhone service plans include unlimited data plans, Apple has now created a world where any person anywhere can create a mobile application and not have to negotiate with the carriers for the privilege of deploying the application.

In over 20 years of trying, Apple was never able to overcome Microsoft. But, in less than one year, Apple has thwarted Verizon, Sprint, and AT&T.