TECH TALK: Web 2.0: Strategy and Innovation

Umair Haque discussed the strategy in this new world in the context of a New York Times article about Yahoo. Here is an excerpt from the article: Mr. Semel describes a strategy built on four pillars: First, is search, of course, to fend off Google, which has become the fastest-growing Internet company. Next comes community, as he calls the vast growth of content contributed by everyday users and semiprofessionals like bloggers. Third, is the professionally created content that Mr. Braun oversees, made both by Yahoo and other traditional media providers. And last, is personalization technology to help users sort through vast choices to find what interests them.

Umair writes:

[Yahoo’s] ‘pillars’ are really the fundamental strategic point of all three of my ppts: vertical integration is the dominant Media/Web 2.0 strategy. Why? Because you can realize all three 2.0 economies that way:

1) Network economies dominate search.
2) Viral economies dominate microcontent/communities.
3) Distributed economies dominate personalization/microchunking.

The point is that if you can put all three together, you realize a *huge* scale advantage, because you’re realizing nonlinear returns to scale along all three dimensions.

In fact, winning plays can even maximize returns along one or two dimensions in specific verticals (EG Become – viral/network economies for product reviews; SideStep – network economies for travel search); incumbents should be looking to maximize across all three (viz, Google is killer at extending network economies across domains, but notably poor at viral and distributed economies; Yahoo is mediocre at best across all three).

In this context, an exhibit worth seeing and thinking through is Umair Haques presentation.

The result of all the Web 2.0 talk is growing enthusiasm. Michael Parekh writes:

The Deja Vu I’m experiencing is less with Web 1.0 (1994-2001) in the latter part of the nineties, and much more with what I’ll call PC Software 1.0 in the eighties Fast forward to today, and we seem to be in a happy-go-lucky, warm and fuzzy environment of the mid-eighties in terms of new consumer services based on Web 2.0 technologies, consumer created content and services, and slicker software programming technologies like Ajax and the upcoming Microsoft Atlas that promise to turn the Internet into the big personal computer in the sky for millions of users around the world, from any type of access device (PC, cellphone, PDA, appliance, etc.)

Entrepreneurs and technologists are introducing creative things everyday, fueled by an increasingly interested VC community looking for early-stage startups again, both here and in previously forbidding places like China and elsewhere.

Examples abound in so many categories:
1. Blog Search: Technorati, Bloglines, PubSub etc.
2. Vertical Search: Indeed-Jobs category, Become-online shopping, Trulio-real estate, Truveo-consumer videos, amongst others.
3. Tagging companies:, Technorati,
4. Social networking: Friendster,, Dogster and Catster for example.
5. Internet telephony: Teleo (bought by Microsoft), Skype (bought by eBay), Vonage (bought by?? if not IPO’d soon)
6. International: China-Alibaba, Baidu, etc.
7. Wiki Software and Services: Wikipedia, JotSpot, Socialtext, 37Folders, etc. (VC Fred Wilson has a good post on his enthusiasm for the space).

These are but a smattering of examples. In these and many other categories, both here and overseas, VCs are increasingly attracted by the opportunities to “exit” these investments by selling either to the major web companies or the major incumbent companies in media and other industries

Web 2.0 has recharged entrepreneurs, creativity and innovation on the Internet. While some may mutter about yet another Internet Bubble, I dont think that is the case. What we are seeing are increasingly useful services coming the power of people and computing. The future is upon us. Can we, finally, get around to also building the Indias Web 2.0?


Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.