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Guarding The Gates: Web 2.0 Barriers To Entry

This post was spawned from a comment left at TechCrunch where the commenter had this to say about Meebo:

“I’m still curious how they plan to turn this into an actual business, and how they plan to deal with the non-existent barrier to entry in their space. I wish them the best of luck!”

I responded to that comment with this:

“Matt – the barrier to entry isn’t trivial by any means. Interoperating with the major IM services (since they update their connection protocols often and like to lock-out 3rd parties) is a major pain, so these guys deserve all the credit they’re given.”

Many people feel as though all “web 2.0″ companies with funny names are all in the same boat, but that’s certainly not the case. Lumping all the new companies together is probably bad for the whole, considering there are many companies doing amazing things but I’d say even more companies who will probably fail this year. Here are some separators/questions that I think all “web 2.0″ companies should be analyzing and answering themselves:

Are we actually useful or just fun to play with?
Are we actually innovating or just mashing/copying?
Are there barriers to enter our market, or can anyone be us?

Analyzing Meebo

I like Meebo. I like the service they provide, and the 3-person team is really friendly and approachable. I had the good fortune of conversing with Seth via email and he asked me if I’d like to join the Meebo team as their lead visual designer. Although I’d really like to design/redesign Meebo and their services, the full-time job thing is just not my bag anymore. Here are my answers to the above questions regarding Meebo:

Meebo is actually useful, actually innovative, and there are barriers to enter the market. Meebo is incredibly useful — anyone who is away from their main computer, or spends the majority of their time somewhere else other than their house (people who work in offices, college and high school students, etc.) can use Meebo. I can’t even imagine how many thousands of students are on IM right now courtesy of Meebo. The company is innovating because interoperating with the various IM protocols is incredibly difficult, and because those protocols are often changed with no notice given to 3rd party clients, I’d say that Meebo has done a phenomenal job. There are barriers to enter the market, because for the most part the Meebo competitors are Java applet-based or are incredibly buggy from what I’ve seen, and Meebo’s infrastructure is elegant and smooth. With the hundreds of thousands of Meebo users online, I’m positive that their revenue model will present itself soon.

Analyzing 43 Things

43 Things is a site where people find and make lists of the goals and aspirations they have in their life. You pick “43 things” that you want to do, and then others can look at your goals and agree with yours or pick their own. I’ve been told that once you choose your 43 goals, you can’t pick any more — that seems kinda odd to me, but maybe they’ve changed that policy. An Amazon-backed creative team called The Robot Co-op put it together, and here are my answers to the same questions about 43 Things:

43 Things is fun to play with, mashing/copying, and has no barriers for entry. 43 Things isn’t useful in the sense that it lets you get anything done, but it is a ton of fun to play with it and see what other people want to do. I’ll call it a mashup because you’re essentially just adding/modifying/deleting tags and blog entries, and viewing other people’s tags and blog entries, but for 43 Things they’re all related to life goals. 43 Things is innovative in how they are remixing the idea of tagging, so they’re walking a fine line between innovation/mashup. There aren’t any barriers to enter this market, considering the Ruby on Rails framework provides easy methods of duplicating the 43 Things functionality for the most part.

Analyzing Flock

Flock is an updated and refreshed version of the Firefox web browser that adds geeky built-in functionality to connect to weblog services, Flickr, Delicious, etc. They’re still in beta and for good reason — building on top of Firefox with totally custom development is going to take a lot of time to get right. Here are my answers for Flock:

Flock is fun to play with, actually innovative, and there are barriers to enter the market. Flock is useful to only a small percentage of the population, so for now I’ll say that simply fun to play with until tech-centric things like Delicious or blogging takes off for the majority of the population. Even though I harp on Flock a bit, I still think that what they’re doing is totally innovative and would never take that away from them. Modifying the entire source code of a web browser? Yeah, I’d say that’s a strong barrier.

Analyzing Online Calendars

Michael Arrington wrote last month about the “online calendar space” and how many new companies are being formed around this concept. While I’ve played with most of them, none of them look particularly novel or useful enough for me to use them everyday. Here are my answers:

Online calendars are fun to play with, mashup/copies, and have no barriers for entry. I won’t say that online calendars are useful, simply because Outlook dominates the enterprise and workplace scene and it’s nearly impossible to break into that industry. Online calendars are good in theory, however I don’t see any that link to my email client, Apple Mail, considering all events in my work are somehow tied to an email since email is still used to set up meetings and whatnot. Because I still need to email somebody then add it to my online calendar, the two-step process doesn’t really do it for me. If someone built a kick-ass Mail add-on that let me right click on email messages and generate calendar items/events based on their content, then I’d be really excited. Online calendars are not innovative, considering people have been producing online calendar applications since the 90s — I’ve yet to see a feature or innovation that really stood out in my mind as amazing, and because of that all the online calendars have essentially the same featureset. There are no barriers for entry, because any 16 year old with Javascript knowledge can put together an online calendar system.

Making The Bucks

There are essentially only two different revenue models affixed to new “web 2.0″ companies: charge for a product or service, or give away the service and charge advertising (or both.) If you put together a service that is attractive and useful enough, the eyeballs will come and advertising dollars will follow — this seems to be the revenue model of choice for many new companies, and this is the saving grace for new “web 2.0″ companies who put out a service that’s not useful or innovative, but is incredibly cool. People seem to like wasting their time learning more about other people’s aspirations, but if 43 Things charged for that service then it’d go down the tubes since it’s not useful. And therein is the cardinal sin of “web 2.0″: if a product/service is not useful, you cannot charge for it. My theory is that so many new “web 2.0″ services are free because they know that they haven’t put together something useful enough to charge any money for it :)

About Mike Rundle

Comments

  1. Mike – Thanks for taking the time to mention 43 Things. I’m sorry if you don’t find the site useful, but if you take the time to check out what people who use the site think of it, you’ll find many of them do get great value out of it.

    You might be confused about the whole intention of 43 Things. We aren’t looking to make your life easier or more efficient. We are basically trying to make it more fun and meaningful Now that doesn’t appeal to everybody, and that is fine with us. We aren’t trying to attract people who are looking for useful. But we’ve had no trouble finding almost a quarter million enthusiasts who want to share their goals online, connect with others, and gain clarity on their intentions. And we’ve done all that with no marketing. So I’m pretty sure we’ve managed to create something of value, if not something that is useful to Mike Rundle.

    As far as business fundamentals go, I think you are missing the story on both how a business earns revenue and how it builds barriers to entry. Think about a site like craigslist.org. The barriers to entry are negligible from a technology standpoint. But they are immense in terms of the network effect that craigslist has in the form of the largest marketplace of buyers and sellers. Craigslist is a great place to list a classified because of the people who use it. Not because it has a technical solution no one else has, but because it has the most buyers and sellers. So many, that they don’t even monetize nearly as much as they could.

    You might think 43 Things has few barriers to entry because someone could build a site with the same features. But you are missing what 43 Things is about if you think it is about the features. It is about the users of the sites, their common dreams, and the networked information flow that happens on the site. That’s why almost a quarter of a million people have signed up to share their goals, not because someone decided it was a “web 2.0″ website. It’s also a site (perhaps the only one you mentioned) earning real dollars in terms of revenue. We don’t charge for the site, not because we don’t think it is valuable, but because we make our money on page views that have highly targeted advertising directly related to people’s goals. It also may not be wise to try and monetize something heavily in its early stages.

    Lastly, part of the network effect we are trying to achieve is making a network of networked sites, so you have to think about how 43 Things, 43 Places, 43 People, All Consuming and Lists of Bests all relate, and how adding a user to one adds increased value to the whole constellation of sites. What I think we’ve built is a constellation of sites where we’ve leveraged the common infrastructure to attract a diverse audience of enthusiasts. That audience in turn draws advertisers and readers that make for a virtuous cycle of business operations. Anyway, hopefully that helps you see a bit more as to how our business operates. Ironically, I think you are still lumping “web 2.0″ companies together, when you’d be better off looking at the fundamentals of how a company gains customers, earns revenues, and brings new products to market.

  2. Britt says:

    This is something I’ve been thinking about because, for some odd reason, I feel compelled to try out every new Web 2.0 application.

    There are lots of great pieces out there, but I can only remember so many of them. I’d prefer a package (Netvibes). It’s also difficult for me to give up an existing service to try a new one, such as moving from delicious to magnolia.

    I also need a compelling reason to go to one of these apps, which 43PP&T hasn’t yet provided for me. It doesn’t help that it never remembers me for some reason. I’ve even had some good conversations there but it’s still not on my A list.

    I prefer Backpack because it places several functions into one simple app (to-do lists, text, and reminders).

  3. PJ Hyett says:

    If anyone thinks that building Wayfaring is easy, they’re more than welcome to try and compete :-)

  4. Jaan says:

    Mike,

    “Are we actually useful or just fun to play with?
    Are we actually innovating or just mashing/copying?
    Are there barriers to enter our market, or can anyone be us?”

    This is very basic stuff, but it doesn’t get said nearly often enough. Thank’s for…well…saying it.

  5. Tegan says:

    Hi,

    I read your comments on web based personalized desktops. I was wondering if you have visited Pageflakes (www.pageflakes.com) already? We are offering services that allowing you to read news feeds and set up multiple pages that can be customized with local weather, address book, todo lists, event finders, TV guides and much more. Looking forward to hearing from you. Maybe you have some comments or thoughts on what you like or where we can improve.

    Thanks and best regards
    Tegan

  6. Mike Rundle says:

    Hey Tegan, I have heard of Pageflakes and I’ve read reviews that put it on the top of the Ajax-enabled homepage implementations. I just tried in Safari and it didn’t load — I’ve written in the past about web apps not catering to the Mac OS X Safari audience (here and here) so I don’t think it’ll be my new homepage ;)

    On Camino it does look nice though, however I’m just not in your market since I haven’t had an actual homepage in years (I keep Safari running at all times.)

  7. Greg says:

    Yes,Jaan thats a valid point;Innovation or replication?

  8. James says:

    I’ve been working on this site for a couple of years now Boomtrek and I am experiencing many of the problems of the other Web 2.0 properties. I have to stick it out while earning nothing, to hopefully gain enough traffic/userbase to be eventually bought out by a Google, Yahoo or Microsoft. I have learned some very important lessons; its very hard to charge for advertising when you are just getting started, especially when your site is not named Google or Yahoo. Everyone wants things for free on the internet, so advertising is the major business model for web content. Many voluneers are providing free knowledge in forums, blogs and wikis… do people ever wonder of its validity? Will people value travel advice from experts versus just anybody? It’s very hard to earn a high PageRank and escalate to the top 10 even 50 results, almost everyone I talk to only surfs the first and sometimes second page of results, therefore the 80/20 rule of rich get richer stands and the most visible companies will earn more backlinks. It’s hard to generate page views for these same reasons, which is the metric for a customer audience that can be sold on marketing/advertising. Therefore, to get on the first page one must use AdWords/Overture to drive people to their site, but why bother when you’re not generating revenue from the site? :) I’d be interested to hear what people think from a useful, innovative standpoint… I can send you to one of the “cooler features” goto Chicago off the main page, type “Hotel Burnham” and see what comes up, it should be a map of the hotel in Chicago, you can click on the Google Map and then do a Nearby search, even filter out phrases… I’m trying to provide local information for people, my main thoughts came from an internet cafe abroad, I need maps of places that are good, so I can find them and walk or drive there (especially hostels) I have 1.3 million records which I’ve acquired/purchased from USA/Germany and China and also slaved overmyself to enter them. I personally think I may be overcomplicating things with more than I need on the site, can I simplify it? What do you think out there? I do need to start making some money on the site that’s for darn sure ;)

  9. Tony says:

    Fascinating article containing lots of common sense and wisdom. Sadly many of us fail to evaluate our own ideas thoroughly. Those funky new names are all the rage now but I wonder how silly the’ll seem in the future when this trend is old hat. Still some of them are very creative.

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