Web 2.0 Implosion Imminent?

By James Mowery Oct 14, 2008 Comments

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Well, one analyst believes so. Those involved with the Web 2.0 industry are in trouble, according to Oliver Young, a Forrester Research analyst. He believes that the supply of Web 2.0 service applications is becoming too great, and that prices will decline as a result. As if that didn't sound bad enough, pricing is one of the few aspects left to compete with.

Business would appear to be solid for vendors that are releasing Web 2.0 productivity and collaboration solutions — sales are through the roof, and the demand for these solutions is constantly increasing. Larger enterprises are beginning to invest in these Web 2.0 solutions, which add legitimacy to the efforts of the Web 2.0 industry. Surely, these things tell a story of strength, right?

Well, according to one analyst, there are fundamental problems embedded under the surface. Oliver Young stated that the pricing of these Web 2.0 solutions will dramatically decrease, as more competition for the industry enters. “Specifically, the amount an average enterprise pays for Web 2.0 tools will fall, despite growing numbers of licenses per customer,” Young stated.

At first, it sounds like this could be a good thing for consumers and a bad thing for those companies involved in creating Web 2.0 products. However, it could be bad for both parties, as companies might not be able to invest time and money to improving their products. Those times when unknown Web 2.0 startups, especially those without business plans, received millions of dollars are — in all likelihood — long gone.

Too Much of a Good Thing

It is interesting to note how enterprise users have been constantly adjusting to SaaS solutions — it is an economical and practical solution to many problems in the enterprise environment. Even though this is the case — apparently, the demand can't keep up with the increasing supply of Web 2.0 products.

The markets that are expected to slump in the near future are far widespread:

RSS technologies
Blogs
Wikis
Widgets providers
Social networking services

Here at CMSWire, we have been constantly providing coverage on these types of Web 2.0 tools, and they are in high demand. However, there is also a fair amount of these tools floating around. So, it is not far fetched to imagine that prices would be dropping in the future. Also, a weak global economy doesn't help the situation either.

As a result, Young advises those companies involved with Web 2.0 solutions to diversify their business — focus on critical issues in the enterprise and innovate in the process. Those companies that can innovate will make money. Those that offer the same thing we have already seen time and time again are likely to fail, according to Young.

A Mashed-Up Mess

Of all the negativity coming from Forrester Research about the future of Web 2.0, the group believes that mashups are going to experience growth.

James Hamilton, an SEO consultant and blogger, strongly disagrees: “Playing with Web 2.0, Mashups, Social Computing and other B/S is over. No more Web 2.0, no more stupidities, because you got real confused with YouTube, MySpace, or Facebook. Leave them alone and get real. You won’t get the huge VC investment for your Mashup solution, you won’t create the next Facebook. If they were to be created in some software kitchen, Microsoft, IBM and Oracle have bigger kitchens than yours, they could have done it. You bought a lottery ticket, you didn’t win. It's time to get back to work!”

Do we believe the blogger or the research group? Well, clearly there are different views about the future of mashups. In practice, the ideas of mashups sound solid, but are they worthy investments?

Uncertainty Looms

No matter how people look at it, the future of the Web 2.0 industry is uncertain. There are plenty of questions and few answers. There are fewer success stories coming around these days, and even those Web 2.0 startups that look promising are yet to generate revenue. Perhaps, if the new way of doing business is failing, this economic crisis should prove to be a wake-up call to everyone involved.