4. End of the Software Release Cycle
As noted above in the discussion of Google vs. Netscape, one of the defining characteristics of internet era software is that it is delivered as a service, not as a product. This fact leads to a number of fundamental changes in the business model of such a company:
While Microsoft has demonstrated enormous ability to learn from and ultimately best its competition, there's no question that this time, the competition will require Microsoft (and by extension, every other existing software company) to become a deeply different kind of company. Native Web 2.0 companies enjoy a natural advantage, as they don't have old patterns (and corresponding business models and revenue sources) to shed.
5. Lightweight Programming Models
Once the idea of web services became au courant, large companies jumped into the fray with a complex web services stack designed to create highly reliable programming environments for distributed applications.
But much as the web succeeded precisely because it overthrew much of hypertext theory, substituting a simple pragmatism for ideal design, RSS has become perhaps the single most widely deployed web service because of its simplicity, while the complex corporate web services stacks have yet to achieve wide deployment.
Similarly, Amazon.com's web services are provided in two forms: one adhering to the formalisms of the SOAP (Simple Object Access Protocol) web services stack, the other simply providing XML data over HTTP, in a lightweight approach sometimes referred to as REST (Representational State Transfer). While high value B2B connections (like those between Amazon and retail partners like ToysRUs) use the SOAP stack, Amazon reports that 95% of the usage is of the lightweight REST service.
Mapping-related web services had been available for some time from GIS vendors such as ESRI as well as from MapQuest and Microsoft MapPoint. But Google Maps set the world on fire because of its simplicity. While experimenting with any of the formal vendor-supported web services required a formal contract between the parties, the way Google Maps was implemented left the data for the taking, and hackers soon found ways to creatively re-use that data.
There are several significant lessons here:
Innovation in Assembly
Lightweight business models are a natural concomitant of lightweight programming and lightweight connections. The Web 2.0 mindset is good at re-use. A new service like housingmaps.com was built simply by snapping together two existing services. Housingmaps.com doesn't have a business model (yet)--but for many small-scale services, Google AdSense (or perhaps Amazon associates fees, or both) provides the snap-in equivalent of a revenue model.
These examples provide an insight into another key web 2.0 principle, which we call "innovation in assembly." When commodity components are abundant, you can create value simply by assembling them in novel or effective ways. Much as the PC revolution provided many opportunities for innovation in assembly of commodity hardware, with companies like Dell making a science out of such assembly, thereby defeating companies whose business model required innovation in product development, we believe that Web 2.0 will provide opportunities for companies to beat the competition by getting better at harnessing and integrating services provided by others.
6. Software Above the Level of a Single Device
One other feature of Web 2.0 that deserves mention is the fact that it's no longer limited to the PC platform. In his parting advice to Microsoft, long time Microsoft developer Dave Stutz pointed out that "Useful software written above the level of the single device will command high margins for a long time to come."
Of course, any web application can be seen as software above the level of a single device. After all, even the simplest web application involves at least two computers: the one hosting the web server and the one hosting the browser. And as we've discussed, the development of the web as platform extends this idea to synthetic applications composed of services provided by multiple computers.
But as with many areas of Web 2.0, where the "2.0-ness" is not something new, but rather a fuller realization of the true potential of the web platform, this phrase gives us a key insight into how to design applications and services for the new platform.
To date, iTunes is the best exemplar of this principle. This application seamlessly reaches from the handheld device to a massive web back-end, with the PC acting as a local cache and control station. There have been many previous attempts to bring web content to portable devices, but the iPod/iTunes combination is one of the first such applications designed from the ground up to span multiple devices. TiVo is another good example.
iTunes and TiVo also demonstrate many of the other core principles of Web 2.0. They are not web applications per se, but they leverage the power of the web platform, making it a seamless, almost invisible part of their infrastructure. Data management is most clearly the heart of their offering. They are services, not packaged applications (although in the case of iTunes, it can be used as a packaged application, managing only the user's local data.) What's more, both TiVo and iTunes show some budding use of collective intelligence, although in each case, their experiments are at war with the IP lobby's. There's only a limited architecture of participation in iTunes, though the recent addition of podcasting changes that equation substantially.
This is one of the areas of Web 2.0 where we expect to see some of the greatest change, as more and more devices are connected to the new platform. What applications become possible when our phones and our cars are not consuming data but reporting it? Real time traffic monitoring, flash mobs, and citizen journalism are only a few of the early warning signs of the capabilities of the new platform.