DURHAM - At the height of the dot-com meltdown in the early 2000s, some analysts doubted whether companies whose business model was based solely on the Internet could sustain profitability.
But successes such as Google are proving that the Internet is alive and well. In fact, a whole new generation of companies, collectively called Web 2.0 firms, may now be drawing late 1990s-type interest.
Part marketing buzzword, part techno jargon, Web 2.0 merely emphasizes the adoption of advanced Internet technologies in personal communication, industry observers say.
“This is a natural evolution of the Web,” says Lee Congdon, vice president of global information technology at Raleigh-based Red Hat, “not a new Web.”
Ted Baker, an assistant professor of management, entrepreneurship and innovation at North Carolina State University, agrees. “It’s been an incremental evolution,” he says.
Baker remains skeptical about the hype around Web 2.0 companies but says social networking Web sites such as MySpace, Facebook and YouTube - which use advanced Internet technologies - have influenced the growing acceptance of Web 2.0 technologies in the corporate world. “What’s novel is the way teenagers have used the technology, which has made it attractive for businesses to use,” he says.
BUILDING A NEW PLATFORM
Several Triangle companies have jumped on the Web 2.0 bandwagon. One of them is long time technology entrepreneur Reid Conrad’s Durham-based startup, Near-Time.
Conrad says that Web 2.0 is, in effect, turning the Internet into a operating system. Instead of downloading applications to one’s computer, for example, applications simply reside on the Web.
“As long as you have a browser, you can log in and be engaged,” Conrad says.
Expanded Web capabilities has breathed new life into entrepreneurs who see the potential in providing businesses with Web 2.0 features. However, the new wave of startups is different from those of the 1990s, says Conrad. “Before, you had this gluttony push but entrepreneurs learned from the dot-com bust. The people who are in this now are real people driven by building real technology.”
Conrad has the stripes to discern tech trends. He co-founded Extensibility, a Chapel Hill-based startup that was acquired by Tibco Software in September 2000 for $100 million in stock.
FROM STATIC TO DYNAMIC WEB
The term “Web 2.0″ is said to have been coined in 2004 by Dale Dougherty of O’Reilly Media and Craig Cline of MediaLive International while brainstorming ideas for a conference on next-generation Web concepts.
In an article published in September 2005, Tim O’Reilly pointed out several differences between the more static type of Web sites common to the original World Wide Web (now called Web 1.0) and the new and improved Web 2.0. For example, where there used to be Britannica Online, there is now Wikipedia, a global encyclopedia which can be added to or changed by anyone. Where once there were personal Web sites, there are now blogs.
Industry observers say one of the most important milestones in the evolution of the Web has been the development of markup languages such as HTML and XML. XML technology in particular allows content to be changed and shared between different systems.
In the late 1990s, there was already talk about making the Web more interactive, says Conrad. “But XML was immature at that time.”
The refinement of the XML format eventually led to the development of RSS (Really Simple Syndication), a form of XML that allows content to be syndicated and delivered to subscribers.
The popularity of broadband Internet is also helping the trend. Since an increasing number of Web sites use video clips or streaming video, higher bandwidths are necessary. “It would not have been possible to create YouTube seven years ago because broadband wasn’t as pervasive,” says Mitch Mumma, managing partner at Intersouth Partners, a Durham-based venture capital firm.
COMPANIES FIND THEIR NICHE
Another factor for the rise of Web 2.0 is the flight of advertisers to such companies. Says Congdon: “Everybody is innovating very rapidly in this space, and it’s driving ad revenue.”"Advertising does scale,” says Mumma. “You can get the revenues and monetize it quickly.”However, Mumma says, these companies are merely finding new uses for existing technologies. “The value is not in the technology, but in the community that’s built up around the technology,” Mumma says.
Conrad says his 4-year-old company has been able to leverage Web 2.0 technologies by integrating group Web logs, micro-applications, team events and shared files.
Near-Time says it brings people and content together in a secure, interactive community or “space” in which members of an organization or corporation can collaborate on projects.
Access can be gained through any Internet browser. But since each space has its own “manager,” he or she can restrict access as necessary.
Conrad says his client base includes insurance companies, universities and large corporations such as Adobe.
Another Triangle company bringing Web 2.0 functionality to businesses is iContact in Durham.
According to Ryan Allis, founder and CEO, iContact is an on-demand e-mail service that allows companies to create, send and track e-mail newsletters, RSS feeds, surveys and auto-responders as a way to build stronger relationships with customers, prospects and subscribers.
CREATING ONLINE COMMUNITIES
Having developed its own software and redesigned its user interface, iContact aims to give users an easy way to manage their e-marketing communications through a central, Web-based tool.
CREATING ONLINE COMMUNITIES
Having developed its own software and redesigned its user interface, iContact aims to give users an easy way to manage their e-marketing communications through a central, Web-based tool.
Allis says the 5-year-old company now has over 15,000 customers, including AT&T, Vonage, Symantec, International Paper, Re/Max, Centex Homes and Ford Motor Co.
Serving a smaller niche market is PrepChamps, a Web 2.0 company in Morrisville that puts videos of high school sports players on the Internet so coaches and fans can watch.
Dean Bundschu, PrepChamps’ founder and CEO, says he started the company in February 2007 to capitalize on interest in high school sports. “High school sports is really taking off,” Bundschu says. “We came out covering football but eventually we will cover all sports.”
PrepChamps is acquiring a similar company in Texas and hunting for partnerships with other social networking sites to take its coverage national, Bundschu says. The company also plans to move into the building where iContact is based. PrepChamps hopes to drum up a loyal fan based by creating an interactive online community. “The idea is to improve interaction within the community and to get athletes recognized,” he says. In many ways, the current generation of Web 2.0 companies are merely rediscovering what the previous generation already knew.
Red Hat, for example, grew in part because of an online community of programmers who would download freely available copies of an open-source operating system called Linux, make improvements and then share the new version with other users.
“We provide the tools for developing software and bug fixes, and the community does the bulk of the development,” says Congdon. As changes are made and evaluated, they are added to the flagship product Red Hat Linux, he says.
BOOTSTRAPPED STARTUPS
Since most Web 2.0 companies are using existing technologies, they can be started on a shoestring. “The technology has enabled startups to go into business cheaply,” says Mumma. Yet, he adds that once they become established, “they can be sold for millions.”
Mumma says that current levels of investment in Internet startups don’t come close to 1999 levels. Intersouth Partners recently invested $1.5 million in Reston, Va-based MIXX, a Web 2.0 company that has partnered with USA Today and several online news aggregators.
Conrad says he and co-founder Lee Buck, who is Near-Time’s CTO, personally financed the start-up in 2003 and only last year got an infusion of $2 million from the Wakefield Group, a Charlotte-based venture capital firm. Bundschu says he drummed up the initial $150,000 to start PrepChamps, then raised another $500,000 from angel investors. Allis started iContact in 2002 with personal funds. Three years later, the company got $500,000 from Durham-based NC IDEA, and another $5.3 million from Updata Partners, a Reston, VA-based venture capital firm.
Link to original article: Triangle Business Journal: Web 2.0: Hype or Reality?
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