What is Web 2.0, anyway?

One of the questions I’m asked pretty frequently is, “What exactly is Web 2.0, anyway?” I’m going to have to answer this question in some detail for an audience at McCann Erickson  next month (I’m hoping to post my material here after the fact), but I thought I’d blog something brief here, which – who knows – may help to answer the question for some people.

The main thing you need to know is that Web 2.0 is not one single thing. In fact, the 2.0 moniker is a bit counter-productive: it implies a big, single product ‘release’, conjuring up images of lock-step development and the software release cycles of old. In fact, Web 2.0 refers to a collection of changes to software, the web, and related business models, that are ushering in a ‘new era’ of business opportunity. Vague enough for you?

At the heart of Web 2.0 is a move from a centralized, ‘old-media’ view (large publishers & retailers telling people what they want) to a new empowered/participative model where users are in charge: defining what they want, reading and publishing, buying and selling online. Where Web 1.0 was about hubs and spokes, Web 2.0 is about networks (see this post).

The best way to explain Web 2.0 is simply to enumerate its major elements. I’ve listed them here in their order of importance; at least as far as I’m concerned. Feel free to disagree.

1.  Participation & the network effect
In the Web 1.0 days (that is, the bad old days), content was created for you by large organizations like the BBC, NBC, AOL etc and you ‘consumed’ (read/watched/listened to) it – a one-way relationship. Web 1.0 content business models were all about aggregating large numbers of users together, like a newspaper or TV station does, and selling them to advertisers. In Web 2.0, users create their own content, as well as consuming content created by other users.

User-created content and participation creates a virtuous network effect – the more users who are participating, the better the system. Systems like BitTorrent take this to another level to co-opt users’ computers to help with media distribution itself; the more computers who are joined into the network, the more nodes there are to distribute the content, so performance scales smoothly.

Who’s leading the way? Blog systems like TypePad, Blogger, Windows Live Spaces; video publishing sites like YouTube and Google Video; photo-sharing site Flickr; self-publishing sites like Lulu.com; and music publishing sites Msoundz and Burnlounge, as well as MySpace; Wikis like Wikipedia and Wikihow.

What’s the impact? Traditional revenue models for large content aggregators, based around cutting large-scale advertising deals with a few large advertisers, are being undermined. Increasingly, the best way for an advertiser to reach their desired audience is to advertise on the hundreds or thousands of small sites which serve that audience’s needs. But finding those sites is pretty challenging.

2. Personalization & collaboration
Hand in hand with no. 1 above is personalization. Whilst not a new concept, as the number and range of sources of information has expanded, users have had to become cleverer at selecting the information they want, and tools have grown up to help them do this.

The thing that makes this a Web 2.0 thing is that personalization is now a collaborative effort – by sharing their opinions and preferences, users create a very rich map of the web in a truly democratic way. One of the best examples of this is Amazon’s customer reviews; this is known as ‘collaborative filtering’.

Who’s leading the way? Social bookmarking/tagging sites like del.icio.us, Digg and ma.gnolia; blog tagging/search sites like Technorati and Bloglines; Amazon.com’s customer reviews; eBay’s seller reviews; custom home pages from My Yahoo!, Live.com, PageFlakes and Google; PVR technology like TiVo, Slingbox and Sky+.

What’s the impact? As users become more demanding and more savvy with the personalization tools to hand, they will spend a greater proportion of their time within their own ‘interest zone’; opportunities to interest them in other things become scarcer. Such opportunities will rely on understanding likely correlations between known interests and possible new ones.

3. Democratization of market access
This clumsy title refers to the complete transformation in the ability that individuals and businesses have to promote themselves that has come about in the past few years. This whole thing is really dependent on one key technological development: search marketing. Rather than a few advertisers using large media spends to push a (relatively) small number of products, search marketing has allowed thousands of advertisers to promote a vast array of products – the so-called ‘long tail’.

Who’s leading the way: Google and Overture (now Yahoo! Search Marketing) created the paid search market; MSN is looking to catch up with adCenter. eBay and Amazon Marketplace achieve the same kinds of things within their own (big) worlds. Blogads extends self-service marketing to the blogosphere.

What’s the impact? Small businesses can now have advertising budgets – even if they’re only $50 a month, and can track the effectiveness of that advertising every day. If you’re prepared to ship internationally, you can address a global market, even if you’re selling left-handed widgets for Virgoans. 0.001% of the total market is still 10,000 people (based upon a billion Internet users today).

Coupled with the growth in participation and collaboration, this provides a fertile environment for small businesses suddenly to become big – if something c
aptures the public imagination, and gets promoted via collaborative filtering and participation, it can become very big very quickly.

4. Richer apps
A lot of commentators would put the new generation of funky (in the good sense) apps as central to what defines Web 2.0, but many of the Web 2.0 ‘leaders’ (Google, eBay, Amazon, YouTube) are (for the most part) built using Web 1.0-style development methods. But the emergence of AJAX (itself a catch-all expression for a range of things, not a specific technology) does mean that web applications can behave more like the desktop apps that most people are used to; enabling them to help people achieve more complex tasks online with far fewer clicks and less waiting time.

What’s more interesting in the application development space is the emergence of web services and public APIs for things like Google Maps, which has enabled a new breed of web app to emerge: the mashup. Mashups allow new apps to be built out of existing components available on the web, to combine the best of both apps. A good example is www.housingmaps.com, which combines Craigslist housing information with Google Maps to help potential buyers or renters to find properties in their interest area easily.

The new opportunities to create cool apps has led to an enormous number of Web 2.0 startups, creating a mini-bubble. Most such startups have little or no concrete revenue model, beyond placing Google Adsense ads on their sites (which seems to be a monetization panacea these days). Most will die, or be picked up by a bigger player, as was the case with Kiko.

Who’s leading the way? Google, Yahoo! and Microsoft all make APIs available for their web platforms, and so do Flickr, eBay, Amazon and FedEx. Notable mashups include WeatherBonk, HotCaptcha and Read All About It; and GoogleMapsMania has a whole lot more (for some reason, about 80% of all mashups involve Google Maps).

What’s the impact? Major providers of original content & services (like those listed above) will seek to build developer eco-systems around their products. What will be interesting will be the revenue models for those developers – but major content providers will end up sharing their advertising revenues, that’s for certain.

To summarize…
A lot of folks have focused on some very narrow things (e.g. AJAX) as ‘defining’ Web 2.0. But for me, it is much more about changing business models, supported by new technology, than the technology itself. What this means is that Web 2.0 cannot be dismissed as a fad, since it is really just (just!) an evolution in the way people make money out of the web.

References:
What is Web 2.0? By Tim O’Reilly (who originally coined the term)