Web 2.0 ... A State of Mind!

Snapshots on Web 2.0 from the two day conference organised by CSI (Computer Society of India)- Bangalore Chapter.

Ashish Gupta of Helion Venture Capital himself a successful entrepreneur in the first Internet wave is now a Ventrue Capitalist (He says he does not have a brilliant business idea right now that is why he is a VC). In his key note address he shared a lot of interesting thoughts on Web 2.0, and what to his mind might be the ingredients for success in this space here are the highlights:-

Web 2.0 can be looked at in several ways: as a platform, as a technology, as a sales strategy but nothing really has changed from the dot com days to today, there is no real distinction between Web2.0 and Internet. After the dot com bust there was a need to explain the phenomenal success of some dot com companies and the need to raise fresh money so perhaps that is the reason why people coined a new marketing label in web2.0

At the same time the Internet has indeed evolved in terms of the way content is created and the manner in which services are offered. Today one can "Interact" with the medium.

What is it that an Internet oriented business brings to the table?

Easy to start - hard to scale:- All of us are consumers, so when we see a gap in a service we immediately think of an Internet business that we can set up and go ahead and create a web site. However it is easy to put together a website today and so we see a proliferation of companies. However scaling is not easy.

Today it is also a lot more feasible to raise money than it was before:-

Organizations are also keen to grow and are not so worried about spending money on Internet enabling their business.

All of these things are leading to two guys setting up a website but this is not a technology game alone. Earlier the technology aspect of the business was expensive and one could see value in that itself. However today that is not the case and in case the technology is not path breaking it is not very valuable.

Lot of people have ideas which are features related. Like how to make the email better so they create an email application. These ideas just cannot stand alone as a business and might be useful to a Yahoo or Google but then they have their own teams working on these ideas.

Lot of businesses again depend on Advertising dollars, one however must remember that Advertising dollars add up very slowly.

Technology becomes important while scaling. In India companies have typically under invested in Technology for the purpose of scaling. There is an expertise required to architect your sites to be able to scale. For example Google is able to set of a portion of their site or users for experimentation. Planning for these aspects is important.

Lot of business plans depend on spending marketing money to buy traffic. But is this sustainable?

One interesting statistic is that according to Alexa (A service which ranks websites) the reach of top Indian portals like Rediff, Indiatimes, Sify has come down by 15-20% in the last few years. What is happening?

There are a couple of things which make an Internet business very interesting:

1. Very efficient evolution because the release cycles are just weeks long. So you can release something measure if it is working or not and then release the next version. This also means that the competition is always weeks away. Because of this competitive nature of business there are only a few businesses that have a positive feedback loop, others are constantly on a treadmill. Amazon for instance has razor thin margins and has to keep working on how to improve on it so as to keep ahead of the competition. Internet Businesses do not have the kind of Location advantage that say a Restaurant Business has.

2. Timing is a huge factor. Too early or too late is bad news for the business. So one of the things to do is be patient and not spend too much money. Do not put marketing money before figuring out what works.

3. It is important to measure click stream data and see what works based on some key parameters. Amazon for instance go to the extent of monitoring the Font Size and how it affects the "Check Out" rate. 

What does Asish look for while investing in an Internet Venture:-

Bi-Directionality- So the business is not only about giving out to users but also about taking in which would included aspects like "User Generated" content.

Service Oriented Architecture:- Like www.salesforce.com 

Built in Accountability:- Should be able to easily cannibalize if things are going the wrong way.

Wide Distribution:-

Syndication:- Not necessarily ownership, so open out the API or the source code so it gets wider participation.

Today there are a lot of teams with ideas but few with a good plan to build traffic. Some methods that people have tried to build traffic without spending marketing dollars are having Ghost Bloggers, going to campuses and getting students enrolled onto the idea etc. but then the best ideas are out there with the entrepreneurs. Even fewer people have a plan on what to do with the traffic that comes in.

However one cannot expect an entrepreneur to have ideas on all of the above after all it is a new business or idea. But one needs to be aware of these issues and be working on them.

1. It is good to work with entrepreneurs who are stingy with money. It is also good to work with entrepreneurs who value ownership. So get weary when an entrepreneur asks for a 30 Lakh salary in return for equity. This is like trusting your life with a suicide bomber. The Suicide Bomber does not value his life so will you trust him with your life? In the same way how can you trust your money with someone who does not value the shares in his company.

2. It is important in your team to have someone who understands usability.

3. Do not start a business just because you have a cool technology.

4. There are not that many Business Models around. Either you charge something to the customer or get paid by advertisements.

5. One important business model that does not get attention is providing a service to other companies. This is interesting because companies have money to spend.

6. The Mobile Phone is a big arena which is opening up for an Internet Based business. However I will not be too keen on a "browsing and discovering" kind of business on the mobile because the currently these activities are difficult to do on the mobile device.

Prof. YLR Murthy from IIM-Bangalore raised some pertinent questions in the Track on Business Models Based on Web 2.0. With the advent of Web 2.0 how important will the operating system of the computer be? If the need for an Operating System is removed a lot of us will be doing different jobs than what we are doing today. Will there be a need for a Personal Computer? What is a Viable Business Model? Is it just collecting people on the website and hope things will work out?

Arun Ramanujapuram Director of Advanced Technology Group, Yahoo India R&D Explained how for Yahoo, Advertising is the way to make money. Yahoo has around 500 million active users every month.

Some aspects that Yahoo is working on are

1. "Can a mass of users collaborating fundamentally change the way people find information?"

2. "Social Computing" which is a social structure in which technology puts power in communities.

3.  Social Media is where Media is created through mass collaboration.

4. Because of all this today you are seeing a Bottom up Innovation model. Where group intelligence wins over a pure algorithmic solution.

5. Today Yahoo is looking at expanding search to include "Trusted" information sources like experts and  specific communities.

The Technology Challenges faced today in sites like Yahoo Answers are

a) Semantics Challenge in understanding a Question and Answer. For instance is Jaguar an animal or a car?

b) Reputation of the person giving the answer.

c)  Spam and junk detection

d) Access control

e)  Incentivising people to participate. For example to get people to Tag content, one idea is to have a game where different people tag a piece of content and if two people get the same tags for the content then there is a prize which could be monitory in nature.

Krishna Satyanarayana IBM Software Labs, looked into the Barriers to Innovation that people face in companies. According to a BCG study in 2006 among the top few concerns where

1. Development time takes too long

2. Lack of coordination between people.

3. Limited customer insight.

4. Selecting the right ideas

So IBM is looking at a suite of products which will enable "Collaborative Innovation" something which Web2.0 makes possible this is what IBMs Innovation Factory initiative is all about. The idea is to easily bring Employees, Business Partners, Customers, and Venture Capitalists into a collaborative environment on the net and get this community to participation in creating the innovation, find interested partners, procedures and business models. This process helps in going to market faster.

The collaborating environment has Directories, Social Tagging, Blogs, wikies and feeds among other features.

Anandsudhakar Kesari and Mahesh Tiyyagura of Yahoo India R&D shared that Advertising as a business model will increasingly be important as time goes since people are spending more time on the Internet People using the Internet spend 30% of their viewing time on the Internet TV is far less, yet only 4% of the advertising money comes into Internet advertising this is bound to change. The big advantage of advertising on the Internet is that feedback is fast and it is possible to do fine grained targeting. The person clicking on the advertisement also has an explicit statement of interest and is in an information seeking mode. It is also easy to measure how effective your Internet marketing spend is.

Those were some of the many interesting, relevant and revealing insights that were shared in the two day conference organized by CSI- Bangalore Chapter. The Tracks included Web 2.0 - Challenges in Process World, Web 2.0 Tools, Web 2.0 Technologies, and a Panel Discussion on Dark Side of Web 2.0.  

Compiled for Businessgyan by Balaji Pasumarthy. 

Issue BG72 Mar07