Tuesday, February 24, 2009

Startups in the Age of Web 2.0

The current generation of web startups reminds me a lot of rock bands in the 60ies.

Before the transistor radio and the record player, there were many bands who toured the local dance-hall circuit, since life music was the only kind of entertainment possible. It was rather hard to get very rich as a musician. Records and radio changed the game - it became "winner takes it all". Suddenly the whole country could be swooning to the songs of a few long-haired boys from Liverpool for example - who became unimaginably rich and famous, where many unnamed musicians lost their income. Many of them played a mean guitar too - why was it the Beatles who became famous? But no matter who made it - the record companies always made money...

Today web technology is pretty well understood. Many people could build a pretty state of the art web application and to get started it takes about as many people as for starting a garage band. The web as a delivery platform has made it very cheap and easy to innovate with new service ideas, but not all of them will become the next Flickr, YouTube, Facebook or Twitter. What made those successful anyway among all the similar companies chasing the same ideas?

It's not their technology because unlike the first-gen web startups of the dot.com bubble who had to invent how to build a large-scale web-based service, this is pretty much a solved problem today. Something must have clicked with users (pun intended...) for those who took off big-time as opposed to all the very similar ones that didn't. Maybe some of the same reasons which made the Beatles to become superstars, rather than any of the hundreds of similar bands who remained in complete obscurity. And as in record companies' glory days, on the web, the owner of the large ad networks make money, no matter who becomes the next big thing.

The fate of a technology startup used to be at least somewhat decided by how well they solve some new technical challenges. As the barrier to entry and differentiation based on technical execution has become lower and lower, todays web service startups are not really determined as much by technology any more but by understanding the Zeitgeist and spotting the next trend of cool. At least in this particular field, the Triumph of the Nerds may have been short-lived.