EarlyStageVC

Audience Measurement is a Dismal Science, too

My prior post certainly stirred up a shit storm of foment.  There were really two parts of the post.  One part was the personal POV about sameness in the Web 2.0 startup community.  The second point was the consideration of some larger indicators. 

As was nearly universally pointed out, Alexa is unreliable. However, there is a difference between lack of reliability and systematic bias.  What struck me was apparently consistent phenomenon across the three sites that I chose.  What I did not do, and this is my mistake, is corroborate this measure (Alexa) with other measures.  Below comparisons for Gigaom.com, Techcrunch.com, and Technorati.com on Compete.com and Quantcast.com.  Clearly the conclusions drawn from the Alexa data are inconsistent  with these sources.  While I stand behind my original observation that the wheel of innovation is largely spinning without progressing, the data from these sources do not support the conclusion that the general population's interest in what's new in the web 2.0 community is on the wane.  My apologies to all for trusting a single source.

BTW, for some reason I could not get Quantcast to generate a graph with more than 2 days' data for Gigaom, which is why its so limited. 

Web 2.0 - Over and Out

Many of us in the VC community have been quietly wondering about the state of Web 2.0 innovation. We aren’t seeing much. Startup activity remains strong, but the consumer web landscape seems to be populated with the same bodies with different skins.  Another video deal here; another social networking deal there, and social [feature] everywhere.

The apogee of this Web 2.0 hit me on Friday when I was having lunch with my daughter in San Francisco.  There was a conversation at the table next to us between a 30-something and a 50-something, The younger was explaining to the elder that they had web site with the following attributes

• Users can share any kind of information from files to photos
• Storage isn’t expensive, so we don’t police it today, yet
• Users can invite their friends; that’s how we get new users
• We launched a few months ago and are doubling every month
• We haven’t quite figured out our revenue model, but we think it is freemium (“Let me explain what that means…”)

Of course, this is the generic Web 2.0 company template. Overhearing the dialog felt like the 2007 version of Joe Kennedy getting stock tips from his shoe shine boy. Web 2.0 is in the water, drink up.

We now know the fourth quarter of 2006 witnessed the mainstreaming of Web 2.0.  It began with the YouTube acquisition, followed by a rather incumbent-centered Web 2.0 conference, culminating with the coronation of user-generated media as Time’s Person of the Year.

The notion of Web 2.0 as a wave is now rather long in the tooth, as cycles go. I believe Tim O'Reilly and John Battalle first coined the term in early 2004.

I thought one way to check the energy dissipation around “Web 2.0” would be to look at Web 2.0-centric media.  Three properties that one can reasonably say are pure plays in the Web 2.0 mainstream are Techcrunch, Gigaom, and Technorati.

[Note: the following Alexa data is NOT consistent with other sources.  Please see my subsequent post for additional data from Quantcast.com and Compete.com]

[3/28/07 Update: See this post by Frank at DeeplyGreen showing that Alexa data actually is corroborated by authoritative site data after all. Nice job Frank.]

Say what you will about Alexa ratings’ accuracy, all three of these properties show a similar falloff in Reach from their Q4 peaks, all notably right around the Web 2.0 Conference.

I am not suggesting that Web 2.0 services are losing steam.  On the contrary, the concepts are quite main stream.  Take the poster child for user-generated participatory content - Wikipedia (below).  It's a monster.      

Much of the "easy" innovation seems to have been wrung out of the Web 2.0 wave.  Web 2.0 was cheap - thanks to open source, simple - thanks to RSS/REST, and distinctive - thanks to AJAX and Flash.  It helped more than a little the Google has continued to entice us all with the abundant profits in Internet advertising.

Now the hard work begins, again.  The next wave of innovation isn't going to be as easy.   The hard problems in the WWW are no longer usability or ease of everyday content  creation.  These problems are solved. Digital cameras, SixApart, WordPress, and digital video cameras showed us how ease it could be.  Now the hard part is moving from Web-as-Digital-Printing-Press to true Web-as-Platform.  To make the Web a platform there has to a level of of content and services interoperability that really doesn't exist today.   

The Web today still resembles MS-DOS more than MS-Windows.   Every website is an island, an island that knows nothing about any other website.  This is no different than the world before the Windows Clipboard.  All 640KB of memory was available to whatever application was running.  The point of integration was the User.  As it is today.  Ask anyone who uses a SaaS application.

I am not alone in observing where the world is going.   The hard problems in the vision of a true web-as-platform  involve  all the usual hard computer science issues.  How can we normalize information from disparate sources to make it interoperable?  How do we get to a lingua franca without waiting for moribund standards (think CORBA and SOA)? How can we then manage the transition of legacy information and services into this world of interoperability?

VCs have always made money at finding the ideal point of friction between the Present and the Future.  Profits accumulate in the gap between What Is and What Is Possible.  Web  2.0 is now firmly in the category of What Is. 

The only thing I can say in defense of "Web 2.0" is that it's not "Venture Capital" (from Google Trends).