the web 2.0 economy

A Web 2.0 company fundamentally changes the mode of production of internet content. Web applications and services have become cheaper and easier to implement, and by allowing the end users access to these applications, a company can effectively outsource the creation and the organisation of their content to the end users themselves.

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If Web 2.0 means anything at all, its meaning lies in the rationale of venture capital. Web 2.0 represents the return of investment in internet startups.

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Web 2.0 is Internet Investment Boom 2.0. Web 2.0 is a business model, it means private capture of community-created value. No one denies that the techology of sites like YouTube, for instance, is trivial. This is more than evidenced by the large number of identical services such as DailyMotion. The real value of YouTube is not created by the developers of the site, but rather it is created by the people who upload videos to the site. Yet, when YouTube was bought for over a billion dollars worth of Google stock, how much of this stock was acquired by those that made all these videos? Zero. Zilch. Nada. Great deal if you are an owner of a Web 2.0 company.

This is silly. First of all, the technology behind a site like YouTube is not trivial. The frilly web front-end is, yes. The ginormous backend supporting 100 million videos a day is not. Unless you want to fire that up in your garage, you may want to reconsider the use of the word “trivial”, mister smarty pants. Second of all. shares or dividends aren’t the only possible manifestation of value to be derived from a site like Youtube. Value is derived merely in the enjoyment and usage of the site, which is free, mind you.

Because the capitalists who invest in Web 2.0 startups do not often fund early capitalisation, their behaviour is markedly more parasitic as well. They often arrive late in the game when value creation already has good momentum, swoop in to take ownership and use their financial power to promote the service, often within the context of a hegemonic network of major, well financed partners. This means that companies that are not acquired by venture capital end up cash starved and squeezed out of the club.

In all these cases, the value of the internet site is created not by the paid staff of the company that runs it, but by the users who use it. With all of the emphasis on community created content and sharing, it’s easy to overlook the other side of the Web 2.0 experience: ownership of all this content and ability to monetise its value. To the user, this doesn’t come up that often, it’s only part of the fine print in their MySpace Terms of Service agreement, or it’s the Flickr.com in the url of their photos. It doesn’t usually seem like an issue to the community, it’s a small price to pay for the use of these wonderful applications and for the impressive effect on search engine results when one queries one’s own name. Since most users do not have access to alternative means to produce and publish their own content, they are attracted to sites like MySpace and Flickr.

This, alike, is equally flawed. These sites, to my knowledge, don’t take ownership of your content. Certainly I know it’s true of flickr. They are merely providing the infrastructure support the community. Flickr doesn’t own my pictures – I do. And it’s also deeply flawed to assume that people lack the means to produce and publish their own content. I ran a gallery of pictures of my own server for years, and I’d do it for others lacking the know-how, if there was a need. The value of flickr, as pointed out earlier in their own article, is not the technology – it’s the community, and it’s why I use it. Oh no! I have “flickr.com” in my URL! Woe is me!

This isn’t to say there aren’t some concerns with wildly-popular community sites like Flickr or Youtube, but this article doesn’t even come close to hitting them. For example, there is the minute concern that by virtue of being the defacto location of a global community, a company like Yahoo (Flickr) or Google (Youtube) will wind up with a monopoly which they will then use to extract rent for usage of the infrastructure. This is a minor concern, however. There is currently no cost to using sites like Youtube or Flickr, aside from upgrades for enhanced (essentially limitless) service. No one using these sites feels abused or chained to them. If and when these sites did attempt to abuse their market leverage, there’s nothing stopping the community from fleeing en masse – owing to the dynamic nature of the Internet, there is no major obstacle to a fledgling competitor to take their place. Currently sites like Flickr offer extensive integration via their API, and they make it trivial to backup/move your pictures. This would be the first thing they’d have to eliminate to shift their users into some semblance of lock-in, and that move alone would elicit enough outcry that it would probably be a death knell.

Another potential downside is actively being demonstrated now – as a locus for a community that exists and thrives largely by and for itself, you already have somewhat of a limited monopoly, because you’re isolated from competitive pressure. People are reluctant to leave because by leaving, they leave the community. This means there’s little motivation for improvement. Since being acquired by Yahoo, for example, Flickr has only added a very meager few new features, and it took them years to even get them out the door. This is due, probably, to the sheer imensity of their infrastructure and the lack of pressure from competition. Meanwhile, sites like zooomr have long eclipsed flickr in the features department (and their name is even goofier!), but I am reluctant to leave because I like the community on Flickr.

But the tone of exploitation in this article is still grossly misfounded – raise your hand if you have any clue how Youtube makes money. Anyone? I didn’t think so. Answer: they don’t. Not right now. But Google is thinking about it, I assure you, but as things stand now, how could you possibly feel manipulated? The staggering resources alone that go into supporting sites as big as Flickr or Youtube make me feel like I’m getting a pretty damn good deal. Will it last forever? Probably not, at least not in its current form. Alternative technology is constantly in the works, some even right here in Nashville

There are concerns we should all have about the aggregation of our communities in the hands of corporations whose goal is to profit – specifically the aggregation of resources in the hands of a monopoly (which would be hard to maintain for long on the Internet, without state cooperation). But there’s nothing exploitive going on here – not right now. Users of these “Web 2.0” sites get tremendous value from a site they get to use for free. The community gets what the community puts in. If the infrastructure becomes too costly or overbearing, the community will go elsewhere.