What to call it? The social Web? Web 2.0? Whatever you call the Internetz these days, the current style of development and adoption is still kickin’ it.
A recent report from Wedbush Securities, a Silicon Valley firm that analyzes the valuations of private companies, updates what we already know about the social Web, and shows how powerful it has become. Almost across the board, it is the de facto Web now.
Calling the social Web a Hobbit-like “Second Internet,” the Wedbush analysts land smack dab in the footprint of what is more commonly known as Web 2.0. While their new turn of phrase adds little conceptually, they contribute many interesting facts about the power and prevalence of Web 2.0, the social Web, the Second Internet — take your pick.
The Wedbush analysts offer a list of commonalities for the Second Internet, including:
- Platforms that open their API to developers
- Continuous and rapid pace of innovation
- Companies and brands must listen to the dialogue and participate with customers
- Customer contribution is a large percent of the value/experience
- Every customer has a personalized experience
- Social graph connections drive discovery rather than search
Search, which was the main driver of discoverability in Web 1.0, is being eroded as users move into a more social mode:
. . . while the first Internet is primarily powered by Search, the Second Internet has opened another key path for accessing content — Social Discovery. Unlike Search, with Social Discovery, ideas and topics are pushed to the user, thereby planting the seeds for new interests in the user’s mind.
However, Google’s drive to make the Web searchable merely means that Google itself will become more social. This has already happened with indexing of tweets. But Wedbush’s analysts see another major trend supporting the social Web that will force change at the Googleplex:
. . . the pace of data creation will only increase as we move towards ambient socialization — where instead of having to manually update statuses and whereabouts, these behaviors will be broadcast automatically.
Part of what’s accelerating adoption is the proliferation of computing devices, making the Web inherently more social by putting it in the palms of our hands as we navigate normal social situations — in other words, ambient socialization. Geolocation, proximity and affinity mixes, and so forth all add data and interest to the social Web, creating a feedback loop amplifying usage and relevance.
But will we continue to spend on these tablets, laptops, phones, and desktops? Apparently, the answer is in the affirmative. In a recent analysis, two economists from the Federal Reserve Bank in Atlanta traced computer use back to the introduction of the Apple II in 1977 to calculate how much value, or “utility”, American consumers derive from a given amount of computing power. They compared this to how much we actually paid for that computing power, in the form of desktop PCs, laptops, notebooks , software and so on. The difference, known as the “welfare gain”, was calculated to be US$500 billion in the US alone. This trend seems likely to continue as we spend more time in and derive more benefit from the social Web.
Winners have changed from Web 1.0 to 2.0, as we all know — the Huffington Post is winning the news game in Web 2.0, while CNN.com won it in 1.0. But more important than who is the projected winner seems to be the stakes — growth is more explosive in Web 2.0, so the stakes are higher, and the rewards come sooner. Take Cityville, which grew to 100 million users just seven weeks after it launched. Farmville, by comparison, had just 20 million users after seven weeks. Both are Web 2.0 properties, but the blistering pace of adoption for Farmville has already been dwarfed by uptake for Cityville. No wonder Zynga is the projected winner of Web 2.0’s gaming crown . . . for now.
But where is NBC in the news area? Where’s Electronic Arts or Miniclip for gaming? In coverage of the report on Gigaom, Mathew Ingram notes that these trends:
. . . reinforce how difficult it is for even early Internet leaders to adapt to and take advantage of these changes, as Google is trying to do by bolting social features onto its services through moves like its recent +1 launch. Leading in one wave is no guarantee that one can lead in another — and in some cases may make that even less likely to happen.
Winners in the pre-Internet age didn’t bridge well into the Internet age. Winners in the First Internet (Web 1.0) are not bridging well into the Second Internet (Web 2.0). And with devices becoming ubiquitous, along with broadband, it won’t be long before the pond flips again as new players make sense of the next threshold events. Scale, pace, and utility will continue to push change.
I used the loaded word “disruption” in the headline, and I’d like to discuss why I did that. As careful readers of this blog know, I disagree that scholarly publishing has not been disrupted by the Internet. By strict definition, disruption is about new entrants finding new ways to create equivalent things, not about blowing up the end product. Open access publishing has been disruptive in this sense, and fits Clayton Christensen‘s criteria to a “t”.
The social Web is similarly disruptive, as it is recreating trust networks in new ways. It will take time, but I think there are already people who find studies via Twitter, Facebook, and other trust networks. And if news and search are becoming dependent on the social Web, awareness will be driven more and more by social discovery. PubMed, Google, and other search engines may become adjuncts to robust social discovery tools. As David Crotty pointed out yesterday, there are already people aware of this trend and thinking of ways to game the system as they envision it.
Web 2.0 has moved beyond hype and become the Web of today — social, mobile, ambient, volatile, and disruptive. The rate of change, information creation, and trend development puts extra pressures on innovation, but also on editorial sense-making functions.
Synthesis becomes all the more important in a socially fragmented and fast-moving information sphere.
Discussion
16 Thoughts on "What's In a Name? The Social Web, By Any Other Name, Still Disrupts Effectively"
Plus ça change, plus c’est la même chose.
When I look at that report, I see companies with astonishing valuations yet no functional business models. Web 2.0 has created its own bubble, just as did the dotcom era. And just as happened in that era, this overexuberance is likely to crash at some point, and the serious companies with serious offerings will emerge and move forward. I suspect there will be a lot of people in the same boat as chatroulette founder Andrey Ternovskiy, wishing they’d cashed in at the top of their hype. Behaviors and the way we use the internet has certainly changed as you note. Simple economics, a company having to take in more revenue than it spends, have not.
Speaking of cashing in, the Huff Post is an interesting example here, with the great irony of now being owned by AOL, the shadow of a former Web 1.0 giant. Yes, they’re surpassing old media news sources but at the same time, they’re entirely dependent on those sources for the majority of their content. The Huff Post’s revenues are built around driving traffic using a few simple strategies: 1) stealing content from other news sites and aggregating it, 2) gossip (they’ve really become your top source for all things Snooki), and 3) the unpaid work of thousands of bloggers. If they succeed in driving traditional media companies out of business, where will they get their material for strategy 1? The unpaid writers seem in a state of unhappiness as well, at least judging from the comments on this self-serving essay in another AOL property explaining why you should work for the Huff Post for free. Endgadget’s staff has almost entirely abandoned ship since they were bought by AOL. I’m betting the Huff Post bloggers looking for exposure will likely move on to the next hot property that comes along. The fickle nature of social media dictates that no one stays at the top for long.
Perhaps the real lesson is to cash out while you can. The hype cycle is shorter than ever.
Did you not see the revenues (revenues, not valuation) of Facebook? No functional business model? Are you kidding me?
And Huffington Post pays writers and has a reporting staff that’s larger than most newspapers. They have syndication deals, but so do most newspapers (who are mostly AP and Reuters stories at their heart).
Whoa, slow down there. You’re making a few assumptions, and I do think you have a few things wrong. Let me try to address your responses individually.
Facebook–please don’t assume I’m targeting Facebook as a “pretender” without a business model. By sheer size and inertia alone, they’re destined to be around for a while (I think of them as this era’s Microsoft, or perhaps AOL due to number of users and lock-in). Did I see Facebook’s revenues? No, I did not. They’re a privately held company and don’t release their revenues. There are plenty of estimates of their revenue available though. Here’s one from February that puts their 2010 revenue at $600M, with predictions of $4 Billion in revenue for 2011. But the raw numbers don’t tell the whole story.
If they indeed have 500 million users, it’s interesting that they’re only able to generate a predicted $8 per year per customer, given the amount of time people spend using Facebook. They are truly Google-like in that their business is so bulk-based, requiring huge numbers of users contributing tiny amounts. It’s also interesting to note from the same article that Facebook’s revenue growth lags behind that seen for Google, the company you’re calling obsolete.
And I think you’re not aware of how the Huff Post really drives its revenue. Syndication deals are one thing, what they do is take the first couple paragraphs of a story from other websites then add a link to that website, and that creates a story for the Huff Post. Their primary role is as an aggregator and blogging platform. Your description makes them sound like an old media company while the reality is that their business, like that of Facebook, is based on bulk traffic (see response to comment below).
However, that said, impressive use of diacriticals in a blog comment. I think you’re only an umlaut short of a full house!
It was a cut-and-paste, can’t take any credit. My French is limited to “Je suis le canard gigantesque” and other nonsense phrases.
Sorry, I have to go off on this one a bit more. The social Web is driving the acquisition of everything from the iPhone and Android devices to the iPad and tablet computers to lightweight laptops. And that’s just the coattails effect of a more dynamic, interesting, and useful Internet. The direct revenues that Twitter, Facebook, Google, publishers, and others are generating are significant. Disruption of publishing is significant as marketing moves to the social sphere and clicks-and-mortar makes less sense each week.
The AOL-HuffPo merger is an interesting one. It shows that AOL as a services company is done, but AOL as a content company has a future IF that content is social. What HuffPo has done is build a genuine journalistic enterprise — yes, they syndicate content from other sources, but they also have dozens of dedicated writers, plenty of interesting features (the Sunday liveblog of the talk shows is a favorite), and a large staff of professional journalists — but done so on a social Web platform, which has served them well. It shows how the game has changed. And their revenues exceed $30 million, from what I can tell. Not bad for a 5-year-old startup.
There are failures in the space, but they fail fast. The successes can be huge and happen relatively quickly, as well. In fact, that’s one trait that seems to be emerging — more volatile, but the upside is bigger and comes more quickly.
I’m in agreement with you that the social web is changing the way we do business, and generating significant revenues. No argument there. But much of it is indeed overhyped companies with little business value, garnering enormous levels of investor capital without an actual business plan (do you really think that the Color app, which allows you to share photos with strangers at the table next to you is worth the $41M that’s been invested?).
On to the Huff Post. Your description of it makes it sound as if journalism is it’s main reason for existing. Sorry, no, the Huff Post is a content farm, and the reason AOL bought it is that AOL wants to become an enormous content farm. Since being bought by AOL, the Huff Post is dumping paid writers left and right. They, like all other AOL properties, are now under a strict set of rules requiring them to create content based on “The AOL Way”:
AOL tells its editors to decide what topics to cover based on four considerations: traffic potential, revenue potential, edit quality and turn-around time.
AOL asks its editors to decide whether to produce content based on “the profitability consideration”
The documents reveal that AOL is, when the story calls for it, willing to boost traffic by 5 to 10% with search ads and other “paid media.”
AOL site leaders are expected to have eight ideas for packages that could generate at least $1 million in revenue on hand at all times.
In-house AOL staffers are expected to write five to 10 stories per day.
AOL knows its sites are too dependent on traffic from AOL.com, and it wants its editors to fix the problem by posting more frequently, with more emphasis on getting pageviews
Does this “scaled content production” sound like good journalism to you? Here’s a quote from one such journalist, “AOL is the most f—–up, bull—t company on earth," says one, who joined AOL in what he calls, "the worst career move I’ve ever made.” Most of Endgadget left in a huff over these rules (off to create a new competitor, by the way).
But it’s actually a set of rules that makes sense for the Huff Post, and is just an extension of the formula they’ve used to turn a profit, turning the site into a content farm. You may like individual features or writers, and that’s great, but that’s not how they’re making money. They’re making money by generating enormous amounts of traffic with borrowed content, freely provided content and trashy gossip.
AOL is furthering things by combining lots of potential content farms together under one roof, looking to generate numbers, not journalism. They’re firing freelancers and contractors and replacing them with either free content or with young people who will work for less. It’s odd though, in that Ariana Huffington is insisting on recreating the sorts of expenses and trappings that are currently dooming old media companies:
“We’ve been told that all these new, full-time employees will be expected to report to the office every day for a 40-hour work week. For some reason, it’s very important to Arianna [Huffington] to have writers physically working in a newsroom in either LA, New York or Washington, DC, thus going back to an archaic newsroom model that went out with the invention of the telephone, and needlessly eliminating any talented writers in other parts of the country. So much for a global, cutting edge news team.”
A simple wager for you–will the Huffington Post ever generate enough profit to pay off the $315M that AOL spent to purchase it? Given their current level of revenues that you site ($30M), that means it would take more than 10 years if they had no operating expenses at all. In 5 years, will the Huffington Post be worth more than $315M? I’m willing to bet we’ll look back on this as one of the examples of the social media bubble.
Well, the future of HuffPo will be interesting to follow. They may have to learn as they go, like many of us. And AOL may not be the best place for them ultimately. AOL was not where I imagined HuffPo would be, even for a while.
That said, if this spurs competition from angry and disaffected journalists, great. I have no allegiance to HuffPo, but their model has been interesting and effective. Every mojo is there to be lost, however.
And whether they were worth a 10x valuation? Probably, because the $30M was part of a growth trajectory. The risk then falls to AOL to manage it correctly. From what you’re linking to, it seems like they could botch it if they’re not careful.
I think they should be recognized and congratulated for finding an economic model that works. But we do need to really recognize what that model is, that it’s really powered by getting a lot of unpaid content and getting a lot of traffic from trashy gossip. I was a much bigger fan of the Huff Post when it was a rallying place for the left wing. These days it’s filled with the likes of Jenny McCarthy preaching anti-vaccine nonsense and Kim Kardashian doing whatever it is she does.
AOL is a fitting place for it in some ways as they’re really driving the same business model but pushing it to even more of an extreme, hoping to become something along the lines of Demand Media. It’s not something I’m interested in reading, but unlike most online publications, it does have a clearly defined business model.
I don’t have much faith though, in AOL, given their track record with acquisitions.
Oh, also meant to give you a -1 on the article for using the word “Internetz”. This is not 2005, nor is it Xbox Live.
Only in the US does the ‘revenue’ argument seem to trump all other arguments.
Why do you class HuffPo as Web 2.0? The comments are meager. It is just an online newspaper.
It’s built on a platform designed for the social Web, it’s widely shared, it has many bloggers in its midst, it has built-in integration with Facebook and a social layer all its own, etc. As for meager comments, the story about the pending government shutdown I just looked at has 1,308 comments on it, not “meager” by my lights.
I think that’s a weak set of criteria: the platform isn’t used to its potential; the fact that is has many comments doesn’t classify it as 2.0 since most 1.0 newspapers have lots of comments; the “integration” with FB is conventional — and most importantly the bloggers are only “contributing” but don’t define the dynamics of the site.
Think as you will, but why don’t you go look for yourself. Have you created a HuffPo integration with Facebook? Have you looked at the hundreds if not thousands of comments on the site? The platform is used to its potential, HuffPo is growing like no other news outlet, and the blogging is often real-time and most stories are updated throughout the day. Please look at the evidence yourself before criticizing my criteria.
I meant intellectually meager, not numerically. Mostly mindless bitching. The noise to signal ratio is 99.9% or worse. For the record I have quit Facebook,finding it worse than useless, and a fad at best, like the CB craze of the late 1980’s.
More generally, as I am in the search business I want to know more about you apparent claim that social stuff is going to replace search. I just developed a search algorithm, called the X-Portal, that uses Google Scholar to find the core set of papers on scientific problem X. Do you see social media as somehow replacing Google Scholar? I do not see the competition between search and social.
