Web 2.0 & Business Models

Hmmm, just mentioned biz models yesterday....and Web 2.0 conference starts tomorrow which got me thinking:

Companies that survived and prospered after the dotcom bust, including Yahoo, Google, Amazon.com and EBay, weren't just smarter than the companies that went bust. Their business model was fundamentally different. In the Web 1.0, the user was consuming content created by someone else. In Web 2.0, the content is created by the user. 1.0 is an "architecture of consumption," and read-only," the Web 2.0 is "architecture of participation," O'Reilly said. On the old Web, the user is the audience, in the new Web, the user is participant.

"In Web 1.0, everybody was trying to build 'walled gardens,' find ways to keep sites 'sticky,' keep people in," O'Reilly said. The Web 2.0 is about pushing content--and users--out to find, explore and organize interesting and useful things elsewhere on the Web. For example, the Flickr photo-sharing sites provides a platform to allow users to publish photos to other sites.

Now, at this point in the podcast I'm getting very excited, because I'd written about this stuff a few weeks earlier. I called it "user-created content". I said: "You want to know where the big money is coming from on the Internet nowadays? Look in the mirror. Online businesses are increasingly finding revenue in capturing content from users like you. Companies are making money by providing tools and services that let you write stuff, take pictures, organize your information, and publish it to the Web." I cited as examples: blogs and the companies that make the software and services to publish blogs; photo-sharing services like Flickr, community-bookmarking services like del.icio.us, online organization services like Backpack, and social-networking services like LinkedIn and Orkut. - "Wishing I Was At The Web 2.0 Conference," InformationWeek blog

The Information Week author muses about online journalism & Web 2.0 lessons? Look at Korean newsite Ohmynews (snippets from "Korean online newspaper enlists army of 'citizen reporters", SF Chronicle, Sept 18, 2005; then juxtapose that article with Honey I Shrunk the Newsroom about moves to cut over 350 newsroom jobs at six major papers, plus 120 at the SF Chronicle):

The staff [of 54 copy editors, editors and reporters] at OhmyNews fills only two floors of a small office building in downtown Seoul, but it edits stories from thousands of "citizen reporters" across South Korea.

OhmyNews readers can offer instant feedback online and -- if they really like a piece -- monetary tips. Readers poured nearly 30 million won ($30,000) into columnist Kim Young Ok's account in increments of $10 or less in one week after he criticized the constitutional court of South Korea last year.

"They're like street musicians or performers," Jean Min, director of the international news division, said of the citizen reporters.

While the model leans towards Web 2.0, the underlying revenue model at Ohmynews is fairly traditional:

Similar to newspapers, about 70 percent of OhmyNews' revenue is from ad sales. But instead of the remainder going to subscriptions, as at newspapers, Min said OhmyNews gets 20 percent of its revenue from syndication sales, and just 10 percent from paid subscriptions for premium content.

Citizen reporters receive $2 to $20 for each story OhmyNews uses, based on its merit.

Web 2.0 & lessons for services (like marketing/advertising)? No matter what you may think of the controversial BzzAgent, their model of employing a volunteer corps ala Web 2.0 is revolutionary.

Like Ohmynews, they recruit by tapping into fact that "most people aren't anywhere near to realizing their creative potential, in part because they're laboring in environments that impede intrinsic motivation." (Source: Fast Company, "Six Myths of Creativity".) In fact, at Ohmynews, Joe Citizen Reporter reaches into their own pockets for the priviledge of being trained as citizen journalist; if you attend all classes you get your money back. (Source: Joi Ito, AC2005 conference.)  At BzzAgent:

The volunteers cite the feeling of being 'on the inside', like sharing opinions with others, and enjoy feeling altruistic. Has Madison Avenue figured out what open source developers knew all along? - Internal BzzAgent IM

[Refering to one BzzAgent:] When she signed up for her first BzzAgent campaign -- ''The Frog King,'' in fact -- she was working with a pharmaceutical researcher, mostly doing paperwork, and thinking about finding a more fulfilling way to spend her days.

[Another BzzAgent:] ''For me, it's being part of something big. I think it's such a big thing that's going to shape marketing. To actually be one of the people involved in shaping that is, to me, big.'' That made sense to me too. After all, there is one thing that is even more powerful than the upper hand, more seductive than persuading: believing.  - "The Hidden (in Plain Sight) Persuaders", New York Times, Dec 5, 2004

More on BzzAgent at: "The Why of BzzAgents", Crossroads Dispatches

Web 2.0 isn't just about the architecture of participation (even broadening that to social architecture) but goes into the realms of passion, fulfillment and the intrinsic rewards of contributing and creating as part of collectively worthwhile projects.

Bonus: Since the meme is getting out of hand, Tim O'Reilly penned, "What Is Web 2.0:
Design Patterns and Business Models for the Next Generation of Software", Sept 30, 2005.

p.s. I'm going trucking into the city for Recovery 2.0 Thursday and the Web 2.1 BrainJam Friday. Drop me a line if you'd like to meet up. (The "city" is San Francisco as it's known for those that live in Bay Area but not within SF.)

tags business model web2.0 web2con citizen journalism Womma WOM WordofMouth Web2.1BrainJam

Comments

[Irina]

Wow, I never thought about it this way! Thanks!

[Eric Rice]

Why do I have a sneaky feeling that Web 3.0 is a mesh of the old way + the new way + a little ubiquitous presence in the offline world?

Doesn't web 2.0 just pour a ton of fuel into the firepits of those making 1.0 content? "Thanks for doing all the work!"

What happens when Web 1.0 companies *create* Web 2.0 architecture?

It's evil in theory, and we can certainly operate under and independent of that radar, but still.

[Evelyn Rodriguez]

Thanks Irina. Good thoughts Eric. I'm just musing. I don't have a Web 2.0 idea myself. Not even sure if it's Web 3.0 either. But the aspect where you engage others' passions is very intriguing. For instance, your station builds on the passion that drives independent bands. You're not trying to produce all the content yourselves like many webzines, portals, etc. did circa 1998.

I really think Web 1.0 - I lived through it you probably did too - was about throwing servers and bodies and cash and press releases and strategic alliances and foosball tables at problems rather than being being inventive with business models, etc.

[Alex Osterwalder]

I'd propose that all the new entreprneneurs and web2.0 "followers" perform a simple "web2.0 business model health check" ;-)
http://business-model-design.blogspot.com/2006/04/simple-web20-business-model-health.html

Cheers from a "springly" Lausanne, Switzerland, Alex