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Tue 12 Feb 2008 04:06 PM

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Rolling on my 2.0

The rules are different in this second online boom, says Karthik Sundaram, but will it all be about the consumer-driven start-ups, or will enterprises harness Web 2.0 as well?

In the next 23 minutes it takes you to read this, 2.3 million people around the world would have linked in, spiced up their space, faced the book, or at least twittered. So, you may ask-at least if you dare to-and rightly so, who cares?

Oh, come on! You are so 1.0. Not the Valley-type at all. If you do not have a temple to yourself, now is the time to get on to it in cloud space. Your next job will hang on what you say about yourself, and-get this-the viewer tends to focus more on what you said about yourself yesterday, than about what you have achieved in all your life so far.

When you are done with the morning shave and are contemplating that bath, run through a list of names in your mind that are completely devoid of the five vowels, and you may-just-have discovered the next 2.0 magical formula. The next step, of course, is to figure out how you can disrupt your-and mine-daily life with momentary updates about...anything that you think is interesting. Your dog's state of affairs, your state of mind, why you dislike puce, your neighbor's cough...you get it. All those important things in your life that you think are absolutely necessary to make my day.

In the latest MoneyTree report PWC lists out the largest venture investments for the early quarters of 2007 were in social networking-running into billions of dollars. Now that even the deities of Sand Hill road have officially declared interruption as the next big disruption in technology, life in the 2.0 lane is fast becoming an interesting state of affairs.

So what is different this time than-ahem-the first boom?

Cheaper to start-up now:Let us face it. Technology is cheap, computing is cheap, heck, even talent is cheap as offshore is accepted as standard practice in the business. So there are a lot more folks hacking away from bedrooms and garages than ever before. And a lot more folks who are working 24x7 across global partnerships.

Younger, nerdier founders:in the past, finding investors and receiving their permission to think out-of-box was a long drawn out process. Now folks can launch products on the web, market them over viral networks and find success or failure very rapidly. It is easy to start off with just a few thousands of dollars, so the threshold age is much lower for founders.

Tougher competition:If it gets easier to start a startup, it's easier for competitors too. That doesn't erase the advantage of increased cheapness, however. What the increasing number of startups does mean is that you won't be able to sit on a good idea. Other people have your idea, and they'll be increasingly likely to do something about it.

Higher risks are acceptable:Founders and investors have different attitudes to risk. Knowing that risk is proportionate to reward, investors like risky strategies, while founders tend to be more conservative. If startups are easy to start, this conflict goes away, because founders can start them younger, when it's rational to take more risk, and can start more startups total in their careers. Today's 2.0 business plans are completely focused on user-generated interest, content, and transaction values. The risks are definitely much higher than in the past.

Fuzzier path to the bank:with the average founders' age below 25, you cannot expect to find sensible business plans in most startups. And this directly leads to building cool technology with no clear picture of revenue generation. While there are talks of multi-billion dollar valuations, none have come through recently. And none of these 2.0 technologies have an enterprise sponsorship that will guarantee some industrial-strength interest. So, unlike in the past, big acquisitions are going to be far and few in between, and Google will not be eating up your next garage venture anytime soon.

Is the 2.0 phenomenon going to work in the enterprise? Effective web 2.0 in the enterprise actually requires the active support of both the users on the ground as well as the top levels of an organization to really take off. Businesses are structured much differently than the consumer web and major impediments to use of web 2.0 production and consumption scenarios exist. This includes lack of good enterprise search, mountains of closed legacy systems, the challenge of securing highly open, deeply integrated applications, and conflicting data models (XML, relational data, rich media, and more.)

These are all challenges to the ultimate success of Web 2.0 in the enterprise, even to the point that some organizations are increasingly at risk of IT users doing so much themselves that the IT department can begin to lose control. That is, unless they jump into the trenches with their users and help guide the application of Web 2.0 tools without significantly hindering forward progress.

So where does that leave us?

Consumers are fickle. Not surprising, considering that the current batch of founders themselves aren't beyond consumers of other ‘cool' technologies, and are building 2.0 stuff more for fun. Eyeballs, advertising, and 1.0 revenue models aren't going to work much longer. Unless a 2.0 solution solves real consumer problems, tough days lie ahead.

Collaborative intelligence that the 2.0 platform promises, is going to take another 5 or 10 years of evolution-both at the consumer and enterprise levels. Betting on such premises would be risky. So what is your $0.02 on this 2.0? I welcome your thoughts and questions. Mail me on karthik@purplepatchservices.com

Karthik Sundaram is the president and CEO of Purplepatch Services LLC, a Silicon Valley based marketing communications agency specializing in technology companies, IT services companies, and BPO organizations.

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