Web 2.0 Was About Building Experiments, Not Businesses

It looks like we are coming to the end of another bubble, if it’s not already over. In March of 2006 I added the definition of Web 2.0 to Urban dictionary.

“Web 2.0 – Interactive media theory where an infrastructure focusing on content creation, management, and dissemination is built for the user to generate that content in a community framework.”

I think we have taken that theory and successfully put it into practice.   In a few rare cases we even accomplished this with normal people, a feat that was all but impossible during the first bubble.  It’s a major step forward. The Angel Investors and Venture Capitalists that funded this research over the last few years deserve to be recognized.  They took a big gamble, and their efforts have helped to move an industry forward that will define our era.

The Early-Stage industry may need to tell their limited partners that they were making investments in businesses, but anyone in the Social-Media industry knows the truth.  We didn’t create businesses, we created experiments.

In October VCs sent letters to their portfolio companies telling them that now is the time to cut costs because raising money will be difficult.  The subtext to this is that now is the time to start generating revenue because the safety net is gone.  Shouldn’t they have invested in companies that were doing this from the start?  Maybe not.  Maybe the early stage industry is wise to invest in innovation,  but lets call a spade a spade.  The truth is that now is the time to generate a little revenue to subsidize the funding of innovation until the economy picks up.

It’s possible that the early-stage industry has had enough of funding innovation.  Maybe now really is the time to stop messing around with experiments and to create real businesses online.  We have spent 3 years thinking about innovative ways to engage people, and then figuring out how to monetize that later.  We can thank Google for the strategy.  It may be the best way to radically innovate.  It may even be a great strategy to make money when everyone else believes that a site with engaged users is valuable.  Whatever the motive, funding innovation is a noble pursuit and we really do owe them a debt of gratitude.  However, now may be the time to flip that strategy around; determine what people will pay for, and then figure out how to get people engaged.

Thinking this way will probably not result in radically innovative social media applications.  We will have businesses that aren’t as sexy, not as fun, and probably won’t classify as social applications.  They will be boring, revenue generating businesses.  It’s not play anymore, it’s the real thing, but the real thing makes money.

If we get serious, and start building businesses for revenue instead of for innovation and community, what happens to the Web 2.0 social applications?  Should we abandon them as a flight of fancy of an opulent time?

I think we just need a shift in perspective about what they are. A great social application is more like a movie than a business; it’s a piece of interactive entertainment.  A movie can be monetized, which makes it valuable to create, but nobody thinks of a single movie as a businesses.  The movie industry is run by people who make many movies and then monetize those assets.  In that sense the internet is already very much like the movie industry, only our studios are Google and VC Funds.

We should keep creating social applications because they expand our ability to express and open up new possibilities for information transfer.  Social applications that can generate money to justify the investment of the patrons of innovation are even better.  But let’s all stop pretending.  We are creatives innovating around a radically new medium.   It’s not some mystery why we haven’t turned these into businesses.  The truth is that they were never businesses to begin with.

Posted on December 22nd, 2008 at 10:00 by Jason Schwartz in Social Media, Web 2.0

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