No Money in Web 2.0

The Financial Times did a piece on the underlying profitability of "Web 2.0" and came to the conclusion that it isn't:

Many members of the Web 2.0 generation of Internet companies have so far produced little in the way of revenue, despite bringing about some significant changes in online behaviour, according to some of the entrepreneurs and financiers behind the movement.

The shortage of revenue among social networks, blogs and other “social media” sites that put user-generated content and communications at their core has persisted despite more than four years of experimentation aimed at turning such sites into money-makers. Together with the US economic downturn and a shortage of initial public offerings, the failure has damped the mood in Internet start-up circles.

Well, there's a surprise - companies banking on exciting technology are unpleasantly surprised when customers don't find it quite as intriguing. Features aren't the same as benefits, and the value the seller perceives may not be the same as what the buyer perceives. As "cool" as something might be, a company could find - they do find - that no one is interested in spending money on it. You'd think that people might remember the dot com bust, which was only seven or eight years ago.

What gets confusing with the Web 2.0 apps is that many seem so popular. So why don't they make money? Again, it's the perceived value, at least in part. But I've begun to wonder about the underlying psychology. People are used to being social without payment: they go to parties, chat on the phone, talk to a neighbor, and exchange recommendations with friends. The habit is, what, at least tens of thousands of years old? People assume it to be an essential right, and in that case, why would you pay for it? Now you're back to advertising, and that means that companies must decide that they can sell to the audience. Sounds like waiting for Web 2.0 success might take some time more, perhaps when Web 3.0 emerges.