Web 2.0 Summit: Bursting the reality bubble

Is the recession going to bring a dose of reality to the world of Web 2.0? Notable figures from the world of social networking shared their thoughts on the phenomenon and its business applications at a Summit this week.

By Stuart Lauchlan, news and analysis editor

Web 2.0 is a reality, but not necessarily the right kind of reality – or so the man widely credited with coming up with the phrase in the first place reckons as he called this week for the Web 2.0 phenomenon to get serious!

“It's a reality bubble,” said industry commentator Tim O'Reilly at the Web 2.0 Summit in San Francisco this week. "You have to conclude, if you look at the focus of a lot of what you call 'Web 2.0', the relentless focus on advertising-based consumer models, lightweight applications, we may be living in somewhat of a bubble, and I'm not talking about an investment bubble.”

O'Reilly's message was that while Web 2.0 has gained attention through the likes of Facebook and the ability to throw virtual sheep at your friends, the underlying technology and principles have far higher value. "For me, Web 2.0 is about the internet as platform and its power to harness collective intelligence. Areas like the smart power grid, collective action on early disease detection or disaster response, or personalised medicine are all examples of how the principles that drove the consumer internet can be applied in other areas," he said.

"If there is a silver lining in the downturn, it's that we're going to clear a lot of the clutter. We're going to remind people of what matters,” he added. "The next great companies don't come from jumping on the bandwagon. They come from finding something really meaty and tough and hard and putting your best minds to work on it and making the world a better place as a result. I think we have that opportunity brought home to us by this downturn.”

Certainly there seems to be a new sense of rigour creeping in around Silicon Valley – the dot com madness of Web 1.0 is unlikely to be repeated this time around. "What we have seen in the last three or four months is that funding has pretty much dried up for internet Web 2.0 companies," said Chris de Wolfe, co-founder of MySpace.

"Thus you have seen VC companies come out and tell their companies that they are not going to get any more money. Consequently many of the valuations for those companies have also gone way down. I see a lot of consolidation over the next couple of years. Those companies that don't make sense in this space will go out of business or get acquired by larger companies if they are lucky.”

Serious potential

The potential for serious Web 2.0 business applications is genuine, said O'Reilly even if the claims of some would-be Web 2.0 B2B firms are currently met with some cynicism. "Back when Google first came on the scene everyone dismissed search as 'Yeah, not much of a business there'. And these guys said 'No, we are going to organise all the world's information',” he noted. "Then there was Microsoft wanting to put a computer on everyone's desktop. The titans of industry said 'No, the PC is just a toy'. So I feel we are at one of those inflection points where there are enormous problems to be solved and enormous opportunities." 


Speaking of Microsoft, which was the notable dog that didn't bark this week, despite making a song and dance about its own Azure cloud computing initiative late last month. "I think it's fantastic that they're coming in and saying that they're going to have something... someday," said Salesforce.com CEO Marc Benioff, who took part in a panel debate on the future of Web 2.0. At this he spoke of the "mature, dying models like Oracle and SAP - which is maybe already dead."

Benioff's old mentor at Oracle, Larry Ellison, recently dismissed Web 2.0 as vapourware and poured scorn on the concept, but this, according to Benioff, is entirely predictable. He quoted ancient Chinese military strategist Sun Tzu, author of The Art of War, an influence on both Ellison and Benioff. "'When weak, feign strength'. That's the right approach for him. [But it's not] the right approach for these companies that are strong and developing and have tremendous organic growth," he said. "We've embraced these new technologies."

Dave Girouard, general manager of Google's enterprise business, added that the traditional enterprise software vendors hadn't yet learned from the successes of Web-based software for consumers, and are thus failing to meet the expectations of those same consumers when they go to work. "There's an amazing disconnect between the innovation and user experiences delivered in the consumer world and the stagnant, unenlightened world of enterprise computing that puts the user experience far in the background and focuses on business process," he said.

But he was a little more enthusiastic than Benioff about Azure, saying: "It's a great endorsement by Microsoft that this is the future." He added that once Microsoft develops and delivers its online applications, the "apples and oranges" comparison that he believes now exists between Google's and Microsoft's productivity apps would become more of a fair comparison. “Our apples will taste better,” he predicted.