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Web 2.0 promises to bring large-scale changes to World Wide Web. How an individual end-user communicate and co-exist as an online entity will undergo a radical change in the next decade. Social Network Analysis and Collective Intelligence are the
bedrock of Web 2.0 phenomena wherein individuals communicate and collaborate using innovative technical features of Web 2.0, and create a common cohesive intelligent network, which moderates itself and generates zillions of bytes of useful data and information. Corporations by and large are already worrying about the affects of Web 2.0 and re-working their business strategies around it.

Dissecting the Hype

A critical analysis of the emerging start-ups and the phenomena that is Web 2.0 takes us to the following observations: -

1. What's the VC saying?

VCs who have burnt their fingers in Web 1.0 are funding the Web 2.0 party, but are investing a lot less now. In the Web 1.0 world, a typical VC funding would be in range of $5 Mn, which has now shrunk to abysmal amounts like $250 K in the first round of funding.

It still costs a lot to drive a Web 2.0 firm to profitability. A small team of 2-3 developers can create a website, but to grow the service, maintain customers, store humongous amount of data, and manage the traffic requires operational planning, business management and money. Money needs to get regularly invested in infrastructure, people and sales force.

Most of these fresh-out-of-college teams of developers and start-up artists have invested little thought in operational issues that arise after the site is running and is attracting attention through blog and viral publicity. Build-Advertise-Exit strategy is still the Name of the Game for most of these start-ups and they have no real revenue model for the long term, and no differentiated offering from the start-up next door offering more-or-less the same Web 2.0 dish.

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* Contributed by: -
Narendar Lokwani,
Alumni of IIM Bangalore,
Currently working as Business Development Manager at Aztecsoft, Bangalore.