Web 2.0 : Industry Life Cycle

Web2.0 is the latest driving force for new innovation in the web, every day we see many new social media, products, solutions claiming to be web 2.0!! What is web2.0, who are the true web 2.0, can web 2.0 sustain longer “Industry life cycle”, what are the lessons thet we can learn and apply to build a successful web 2.0 product solution. This article explores the above questions in the following section.

Web 2.0 : As Wikipedia defines : Web2.0 is the second generation of internet based services that let people collaborate and share information online in a new way – such as social networking sites, wikis, communication tools and folksonomies.

Some of the web2.0 principles :

  • Web as platform, reach out to the entire web not just the center.
  • Harnessing collective intelligence, turning the web into a kind of global brain.
  • Data is the next Intel inside.
  • End of Software release cycle, i.e. Operations must become a core competency and Users must be treated as co-developers, in a reflection of open source development practices.
  • Lightweight programming models to build loosely coupled systems and allow syndication.
  • Software above the level of a single device i.e. not limited to any specific platform, technology and devices.
  • Rich user experience i.e. enabling user to use web as a medium to collaborate, classify and editing,etc.

Core Competencies of Web 2.0 Companies:

  • Services, not packaged software, with cost-effective scalability.
  • Control over unique, hard-to-recreate data sources that get richer as more people use them.
  • Trusting users as co-developers.
  • Harnessing collective intelligence.
  • Leveraging the long tail through customer self-service.
  • Software above the level of a single device.
  • Lightweight user interfaces, development models, AND business models.

Some of web 2.0 companies:
Google, Flickr, Wikipedia, Yahoo, YouTube …many others

Let’s apply the “Industry Life Cycle” stages to web2.0.

Many of Web2.0 innovations are definitely at the introduction stage.

Technology solutions like small scale CMS or Blogging application like TypePad, WordPress, Drupal, XOOPS and many others are enabling web 2.0 developments. However innovation is at its peak with various tools and technologies being introduced to take web 2.0 to its nth dimension. For instance rich internet application technology like OpenLaszlo,Flex, Google GWT, Ajax, social media are propelling web2.0.

Industry Life Cycle Introduction Stage:
During web1.0, market penetration was difficult because web1.0 companies relied too much on adding functionalities without involving the end user’s preference and participation in evolving a solution. It was built on more hype than substance.User experience was not taken into consideration.Process innovation was rarely part of solution.
With web2.0, the barrier to market entry is lowest!! If we see the success of YouTube or Flickr, they were not backed my multi-million VC fund or mega advertisement to reach to the end user. They followed the classic “allow user to participate and be co-developers of the solution and end user of the service”.
Also developing web2.0 based solution is not expensive because of availability of open source, community support software and evolving solution rather than one mammoth final solution. Web2.0 solution is designed based on principle like any user(IT savvy or not) must able to understand, participate and experience web. This makes web2.0 adaptive yet persuasive.
So are we seeing that the traditional industry life cycle “Introduction stage” principle failing here!!! I think so or the least “Introduction stage” stage has partially merged into Growth stage for basic web2.0 solutions . However if the solution has innovative process, patented ideas, I think the product will have an introduction stage.

If your idea/product has a definitive introduction stage due to innovation/patented ideas, process innovation, key differentiator, you will successfully lay out an entry barrier and continue to introduce persuasive breakthroughs in market place. Google is the leading example.

Let’s explore web2.0 in growth stage, we will take example of YouTube for this.
Growth Stage :
Accelerating market penetration
Standardized product technology
Mass market

YouTube was founded in February, 2005 by Chad Hurley, Steve Chen, and Jawed Karim, who were all early employees of PayPal.
On July 16, 2006, YouTube announced that 100 million clips are watched on YouTube every day, YouTube is currently one of the fastest-growing websites on the World Wide Web, and is ranked as the 15th most popular website on Alexa, far outpacing even MySpace’s growth.
An article in the New York Post suggested on July 23, 2006 that YouTube may be worth anywhere from $600 million to $1 billion. (References : Wikipedia)

The above snippet on YouTube proves that it has quickly transitioned to Growth stage! The question is whether YouTube’s business model has been designed(or getting designed) to penetrate market not only in Europe or USA but also extend to other parts of the world. The threat to YouTube is while it’s expanding, there are copy-cat solutions from competitors!! However as web2.0 philosophy says : Harnessing collective intelligence, turning the web into a kind of global brain, if YouTube continues to innovate and expand the community to other continents, I think it will have advantage over copy-cat solutions and will lead the market growth.
But wait! Don’t you think web2.0 also allows other copy-cat solution to create solution and penetrate market at the same speed as YouTube! It does, as we saw introduction stage has become almost negligible due to least cost to develop (due to open source software) and less entry barrier.
So welcome to world of doom unless your web2.0 solution have substantial business model to innovate, generate and continue be the market leader.

Don’t copy cat solution unless you have a business model. What is important for web2.0 is continuation of market penetration and quick expansion of solution to other parts of the world. Because unless your solution has that “innovative” angle, you will see many copy-cat solutions in record time.

Maturity stage and Decline stage, I can think Friendster http://www.friendster.com/ which was replaced by the arrival of MySpace.(Friendster still making ways back)
Factors like knowledgeable customers, quest for technological improvements and lack of community participation nature made Friendster decline. Does this answer to the critical question we often see in Web 2.0 communities…how long before some bubble burst?
I think we are seeing high innovation and introduction of products in web, however not all of them have business plans or uniqueness which can’t be duplicated, therefore only those will remain successful who keep introducing leading advantages through technology, process, product differentiation and driving the future.

This is an attempt to apply traditional industry life cycle to web2.0 and analyse the pattern for introducing robust web2.0 solutions in market place and also continue to lead the market.
Any thoughts, kindly share.

References :
Contemporary Strategy Analysis by Robert M Gran
Strategic Alliances – HBR
O’Reilly
Wikipedia
http://www.danah.org/papers/FriendsterMySpaceEssay.html

7 Responses to “Web 2.0 : Industry Life Cycle”

  1. Roger Kondrat Says:

    Wow, I feel like I just ate something that doesn’t sit well.

    Lots of spin off discussion to be had here. For instance the cheap startup costs are partially because of the nature of the software industry (generally speaking) but also because of greater availability and access to international labour markets. I doubt it will be this cheap to launch a start up in 5 years as it is today.

    For me I find the cycle of market expansion exciting. I start a company, I partner with a local developer, then when I need to hire developers, I outsource to India/China. Company begins to take shape as an entity not just an idea, now I get VC money. I expand and drive forward into the 1st Tier (US, UK, English language) market place. Once that is accomplished I begin moving into non-english but 1st Tier markets e.g. Germany, France (more culturally familiar).
    Once completed I go to Asia, first stop Japan, then China (through Taiwan/HongKong). On and on.

    What I find particularly facinating is that the people who actually develop and make the technology viable to start with are the last people to benefit. Anyone else think this is interesting?

    Indepth piece with lots of detail, and a good explanation but sometimes I got confused as there were so many specialist terms used ontop of one another forcing me to re-read. I wonder if they were critical to the concepts you were trying to communicate.

  2. wikipedia Says:

    Wikipedia is the key to most success online, when it comes to collabritive content adding. I have spent many hours writing articles for Jimmy Wales and am very happy with this project. I am based in Seminole FL close to the wikipedia offices in St Petersburg. I love contributing!

    Happy New Year Bloggers!

  3. Siddid Srivastava Says:

    Ah! I take a little coffee break from the blogging realm
    and come back to find that you have become amazing?
    ! Wow, times have changed! Keep up the far out work!


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