There was some good discussion on Memeorandum about Web 2.0 “companies” and their apparent lack of business models. This is something I’ve also thought of so I thought i’d chime in with my 2 cents. The question is whether we are approaching another bubble with all this hoopla over Ajax-splashed, Rails powered, RSS enabled, open API web “apps” that have appeared in blinding numbers recently. I guess I’m kinda suited for this question since I’ve been working on my own Ajax-splashed, RSS enabled, open API web “app” for the past few months:-)
i think that this time we won’t see a fully blown bubble as we saw in 2000 but will see the type of usual shakeout or filtering process that is quite common in the tech industry; examples from the top of my head include car manufacturers around the 1915-1920s, semiconductor/chip companies and PC makers in the early 80’s, and portals more recently. There just isn’t a market to sustain so many bloody AJAX desktops ; there’s no need for so many of the same-old formula social networks such as Tagged, TagWorld, and MyYearBook (though i believe there is a market for smaller, more niche specific social networks based around focused topics); or search engines that bring little innovations, etc, etc.
Most of these companies do nothing really new that differentiates them from the crowd. Add that with a lack of clear business model, and inicreasingly fewer barriers to entry and you have the perfect framework for failure. Things will get really bad if the overall economy starts to go sour and we see a decline in Google’s and Yahoo’s stock price. That will effectively put an end to the exit strategy for several of these companies and may indeed stop new Web 2.0 companies from sprouting.
I sure hope this post hasn’t been a prophecy for my own Web 2.0 company;-)