Web 2.0 in and beyond the recession

Web 2.0 in and beyond the recession
By John Newton, chief technology office for Alfresco

Published: December 5 2008 11:17 | Last updated: December 5 2008 11:17

Chris Nuttall, in his Valley View column in Digital Business on October 22, pointed to a severe belt tightening in California by the Web 2.0 cohort. On the advice from the venture capitalist Mike Moritz of Sequoia, a number of companies are preparing for a long, slow and perhaps painful downturn.

It makes for gloomy reading. With consumer confidence at a low and debt at a high, no technical sector will be immune.

Throughout Silicon Valley and San Francisco’s South of Market, everyone is preparing for the shock. People are being laid off and business models re-examined.

Advertising has been the lifeblood of many of the Web 2.0 sites, and companies that pay for that advertising will chop this discretionary spend, cutting those sites’ lives short. There were already a lot of me-too types of Web 2.0 properties out there that were not long for this world, regardless of a recession. A smart venture capitalist would mercifully end the life of some of these companies now and avoid prolonged agony. Even those with a sufficient critical mass of users and momentum should seriously look in the mirror and decide where to trim the fat.

But in some ways Web 2.0 has never been more alive. Web 2.0 sites that connect people and allow them to share information and more – such as YouTube, Facebook, Wordpress, Wikipedia, and LinkedIn – continue to grow in audience, if not revenue. We are looking up new terms, concepts and people on Wikipedia because it is the only source to be current enough to be authoritative. People are reaching out on Facebook to console each other. I have received a flood of LinkedIn introductions from individuals networking in anticipation of having to find a new job.

Experts reach a new audience through their blogs. There are even complaints that the BBC economics editor, Robert Peston, has too much power in this crisis, in part due to the influence of his blog. In previous recessions, we would read the newspaper and watch television to see the latest in developing economic crises. Not any more.

Companies are turning to blogs, wikis, mash-ups and highly responsive websites in an attempt to engage and keep customers. This is where Web 2.0 excels during the recession. It has been built primarily on open source, much of which costs nothing, thus encouraging this type of prototyping and experimentation.

Open source AJAX Toolkits such as the Google Web Toolkit (GWT) and Yahoo User Interface (YUI) provide a much richer user experience – livening up dull, tedious websites. Web 2.0 is the power of mass participation and much greater ease-of-use to empower our users as part of the process rather than the target. So many more business initiatives are possible using low-cost business models of mass participation and lowering expenditure through the use of open source.

The best of Web 2.0 will regain their previous value just as Amazon did from Web 1.0. Perhaps Web 2.0 businesses will have to rely on making money by selling low cost services that add value to a person’s life or to their job prospects during the recession. As a result, Web 2.0 properties are likely to be some of the first beneficiaries of recovery due to their engagement through the downturn.

Clever entrepreneurs will create the next great idea from insights gained from both the rise and fall of Web 2.0, just as Web 2.0 was formed from the remains of the previous burst bubble. Some will just be out of work with nothing better to do. Some are too young now to start a company, but will begin developing ideas. There is a very good chance that next year’s freshman intake at Stanford will yield one of these companies just as it did for Jerry Yang and David Filo of Yahoo or Larry Page and Sergey Brin of Google.

Whatever comes next, we can be sure that there will be greater storage, bandwidth and computing power to provide that amazement, just as Web 2.0 leveraged the infrastructure that was created at the end of Web 1.0. There is the possibility that these new ideas come out of somewhere other than the west coast of the US, but I wouldn’t count out Silicon Valley’s ability to re-invent itself yet again.

Copyright The Financial Times Limited 2008