Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Thursday, October 27, 2005

The Problems With Web 2.0, pt 3 - Success vs Success

OK. I think one of the biggest problems with 2.0 is that success is it's own worst enemy. In a sense, the fact that we have working business models now is a very bad thing. Now, I know this smacks of bubblism (hey, whaddaya expect?!). But hear me out.

Despite a lot of skepticism, it's not that we don't have business models - we do. The market has validated, in fact, at least several different kinds: advertising (Google), transactions (eBay, iTunes), subscriptions (WSJ, NYTSelect..just kidding), metered use (Skype).

I think the problem is the opposite: the success of these models is limiting everyone's collective vision, by letting them largely ignore to the potential of new ones.

What's different about Web 2.0 is that lightweight technologies and convergence on multiple levels create huge new opportunities for hugely cool new business models.

One family is models that redistribute revenues to peers, align value creation with capture, blah, blah. Basically, models make things cooler by making them fairer (aka, more efficient): returns for the people who create value by created shared meanings for goods, not just suits who plot strategies in boardrooms.

Try this on for size:

"...Each time a clip is downloaded by a 3 customer the performer gets paid 1p. With a potential audience of 3.2 million, the most popular clips from contributors could make thousands of pounds worth of cash."

Now - for all the growing buzz surrounding peer production business models at USV Sessions, all over the blogosphere, in boardrooms, on Sand Hill Rd, etc - that's the peer production business model. Redistributing revenues to peers. Rewarding people for the act of sharing information, creating meaning, and adding value.

Let me reemphasize this: that's the model. That's the economic innovation that will fuel the creation of more and higher-quality communities. I've been talking about this since 2003, because the radical misalignment of media value capture from value creation was the one thing that made the least sense economically, and was just asking for disruption.

In fact, we've been watching it happen since then - AdSense is a(n increasingly lame) example; OhMyNews is a much better one. So are the multitude of models that are springing up to reward people for sharing music, etc.

But here's the thing. This model is slipping under the radar. I think that's pretty interesting; that people are asking more and more often 'where's the peer production business model?' - but in fact are missing the forest for the trees.

Why is this? If you ask me, based on numerous conversations with geeks (entrepreneurs), suits (VCs), droids (uh, everyone else), it's largely because we have the reference points listed above, and it's hard to ignore them and really focus on something new.

Let me extrapolate dangerously for a sec. The point I want to make is that I see an eagerness from the geeks and suits to play with 2.0 technologies and see what cool new things they can make. But I don't see an eagerness to play with 2.0 models and see how they can really disrupt old and obsolete economics.

It's almost as if the success of the four or five models listed above have blinded geeks, suits, and droids alike to the potential for entirely, radically new models.

In a sense, this is rational, and not unexpected - success breeds imitation. But I think the reason why Web + Media 2.0 is cool is not just the technology, but the economics behind it. They're disruptive - but it's up to this community to be a little more aggressive in experimenting with them.

That's why I wanted to share the 3 blurb - I think it neatly illustrates the fact that right now, the Valley's playing with new technologies, but largely ignoring the potential of new models.

Nick Carr is (totally) wrong when he talks about the 'cult of the amateur'. In fact, as I've shown, the anomaly is the mass media industry of the 20 century, whose crutch has been artificial scarcity enforced by regulation, marketing economies, and no small amount of collusion (viz, payola, etc).

But if the 2.0 crowd really wants to help accelerate this implosion, it's got to focus as much or more on economic innovation - new business models - as it does on technological innovation.

-- umair // 6:33 AM // 3 comments


Did you see when 3 launched the video in Italy they had to start editing the clips because kids were bashing old people to order? Happy Bashing I think its called... the market works in mysterious ways
// Anonymous Jeremy // 7:46 AM


But remember, we first need the utilities ... the power, water and highways of W2.0 installed, before we can haul out & sell the TV's, dishwashers & ferrari's ... both the platform and the product are required in that order.
// Blogger David Gibbons // 7:30 AM

Manual trackback :
// Blogger phil jones // 6:57 PM

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