A "Web 2.0 Is Dead" Post That Says Something

By Dennis D. McDonald

“Web 2.0 Is Dead” posts are a dime a dozen. It’s a pleasure to read one with real content. Andrew Chen’s Which startup’s collapse will end the Web 2.0 era? warns that business models that don’t include secure revenue streams are hazardous to corporate health.

At minimum, if you have valuable content parked in the cloud on a network you use for free, consider yourself warned, especially in these perilous economic times.

The practical question is what the “best” business model is. There isn’t just one. Reliance on people — and systems — for valuable services you don’t control carries a risk. I believe that one model that does make sense for content businesses — sometimes referred to as “publishing” — is to control not only the content but some part of the delivery system. The iTunes/iPod combination is one example. Another (emerging) one is the Amazon Kindle. If you make the overall experience a really good one, people might be willing to overlook downsides like DRM.

An important question is whether competition exists (or is allowed to exist). DRM can be viewed as an artificial restriction on competition. Sometimes it works, sometimes it doesn’t. As we’ve seen in the U.S. it also helps if you manipulate the legal system to obstruct competition.

Even though I’m not a big fan of DRM, as the Chen article suggests bad economic times will force changes. I think that we may see increasing emphasis on hardware and software lock-ins coupled with increased pressures from content industries for stronger “anti-copying” enforcement mechanisms.

A larger question is what impact the economic downturn will have on the online sharing and exchange of information we’ve learned to take for granted during the Web 2.0 “era.” Will people be as willing to give away high quality content “for free” as before? Will ad-click-based revenues be sufficient to continue current sharing practices? Chen questions such assumptions.

One thing I see happening will be the disappearance of many  “free” networks. Subscription fees will probably become mandatory. Systems like Linkedin adopted annual subscription fees years ago as a way to offer multiple service levels. I expect this practice to spread to other services and networks that currently provide “free” service.

Copyright (c) 2009 by Dennis D. McDonald, Ph.D. Contact Dennis by emailing ddmcd@yahoo.com.

Comments

[Larry Kilbourne]

Dennis - Good questions raised. The lack of focus on monetization that characterizes a lot of Web 2.0 ventures recalls the run up of dot com funded enterprises with no business plans that included revenue streams a decade ago. Then the mantra was that the Internet had rendered obsolete all the old business models. The next thing that happened of course, was the collapse of most of these start-ups and a redirected VC focus on bottom line issues.

I suspect you are right, and that eventually a lot of 'free' things will morph into subscriber services, with perhaps different levels - like your example of LinkedIn.

Thanks for sharing!

[Dennis D. McDonald]

Bob Weber provides comments on the above post here:

http://www.managingrights.com/2009/03/dennis-mcdonald-will-hard-times-lead-to-more-drm.html#more