Monday, October 10, 2005
Why Web 2.0 Is (Really) Important - Special Beancounters Edition
Many of my classmates from b-school are puzzled at my interest in Web 2.0. They see it as a tiny, small-change market, relative to the markets and industries they've specialized in. $20-50 million acquisitions are not exactly earth-shattering events.
Now, that's true - for now. But (and I'm sure most of you know this, but let's recap), the reason Web 2.0 is important is in it's future value.
The fundamental hypothesis of most of the people backing Web 2.0 is that it's special because it's going to be the consumer interface to many 2.0 markets. Media is one example that I've analyzed to death. Another one in whch interest is accelerating is Applications (viz, Zimbra, Google Office, etc).
Why is this? Fundamentally, it's because Web 2.0 techs make info liquid and plastic. They let it be be frictionlessly unbundled and rebundled. That, in turn, enables convergence on multiple levels.
This is why the consumer value prop is so strong - Web 2.0 is not just the infrastructure for the digital home, but also for the digital lifestyle (viz, Media 2.0 + mobility), digital productivity (Apps 2.0), peer production (Consumer Goods 2.0, etc).
Now, note also that in each of these markets, the Web 2.0 layer is the layer that the consumer connects to - it's the most strategically important segment of the value chain.
So, yeah - right now, Web 2.0 is a small-change market. My market analysis tells us that the current market size is currently between 3-5% of the media industry - not huge by any stretch of imagination.
But the potential for Web 2.0 techs to grab a nice slice of each of the markets discussed above is very real - on the order of 15-20% (to begin with). Now, throw the value of market power into the mix, and all that adds up to a fair amount of $$$. I won't run the numbers here totally, but it's on the order of hundreds of billions.
Dude: please check your its/it's usage. Good thinking can be hobbled by sloppy grammar, even in blog posts.
Funnily I used to think that geeky nature ( less & less of Beancounter) of your analysis came from the influence from LBS. That's why I used to suggest my techie friends (if they chose to apply for MBA) to pursue LBS. :)
Little did I know until now that you were an outlier in the beancounter crowd :)