It has been the buzz of the internet and is here to stay…web 2.0 is upon us. But what exactly is web 2.0? According to Wikipedia, “Web 2.0 refers to a perceived second generation of web-based communities and hosted services — such as social-networking sites, wikis and folksonomies — which aim to facilitate collaboration and sharing between users.”

Since its inception, the web 2.0 culture has seen the rise of some of the most successful group oriented websites such as YouTube and Digg which have redefined social media on the internet. The phenomenon has also spawned countless websites all trying to cash in on the buzz and attraction of this new form of e-collaboration and sharing. The only problem is, the business models are lacking.

Looking at web 2.0 styled sites strictly from a business standpoint, there is no basis for growth. Sure the big dogs like Facebook, YouTube and a select other few have climbed the ranks to become highly profitable enterprises (Google’s takeover of YouTube - $1.65 Billion and Facebook’s astronomical valuation - $16 Billion), but the vast majority of web 2.0 sites can only fathom to ever come within reach of these giants. I can’t even begin to explain the amount of sites that I see on a daily basis who have developed useful tools and raised millions of dollars in venture capital but have no plan or model in place to derive revenues from their website or service.

It seems in the web 2.0 world, the only business model that everyone follows is to build a popular site and sell ads on it. In essence, there is nothing wrong with this concept and it has been a proven business model for a number of years, however it is a highly competitive space in the current market and as the internet develops advertisers are seeking out highly targeted advertising campaigns to maximize their dollars.

With the millions upon millions of dollars that venture capital firms are pouring into websites with little or no chance to turn a profit I predict that the web 2.0 trend will greatly slow down over the coming years and will revert more back to profit based websites with real revenue strategies.

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This entry was posted on Saturday, October 27th, 2007 at 10:23 pm and is filed under Editorial. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.