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Having invested in and led a handful of Internet startups, John Borthwick knows well that the tide of new Web 2.0 companies is changing how people interact with the Internet. But recently, the co-founder of Internet technology incubator and investment firm Betaworks has noticed something altogether different. Hundreds of technology startups are cropping up, many backed by venture capital, and coalescing to create a new experience for Internet users. The hallmark of these companies is that they rely on or enable the near-instantaneous exchange of information and online content. Borthwick calls it the "Now Web." "There is something new going on here," muses Borthwick, whose New York firm has invested in nearly 20 startups over the past year. "Somewhere in the past few months, the way that I experience the Internet, and specifically live information, changed. There is a 'Now Web' emerging out of an ecosystem of loosely coupled products. "The density of the conversations and the speed at which they emerge and evolve is different," he adds. Indeed, the proliferation of social networking, blogging, video and other Web 2.0 services is quickening the tempo of online communication, imbuing the Internet with a new sense of immediacy in public and semipublic discourse. Even the most prominent of these Now Web companies has yet to show much by way of profits, and questions abound about the long-term prospects of the businesses that are behind this emerging Internet Zeitgeist. This uncertainty, coupled with the sense that social networking is already saturated, is keeping some investors away. Despite such barriers, over the past few months several key Now Web companies have attracted funding from some of the best-known names in venture investing, including Fred Wilson, co-founder of Union Square Ventures, a New York firm that has co-invested with Betaworks in several startups, including San Francisco's Twitter Inc., the quintessential Now Web microblogging firm. "People who can't wrap their heads around trying to monetize these businesses aren't trying that hard," says Wilson, who expresses surprise that more venture capitalists haven't invested in Twitter. The notion of real-time information over the Internet is not new. But over the past decade or so, the speed at which user-generated content is created, viewed and exchanged among consumers has greatly accelerated. "My first experience with user-generated content was in the '90s, with GeoCities, where you built a Web page, put a couple of pictures on it and you were done," Wilson says. "Then blogging came along in the late '90s, and people started to post stuff on a regular basis on the Internet." Even with the onset of the now ubiquitous Web log, digital content was rarely viewed or exchanged instantaneously. Enter Twitter, a deceptively simple service launched in 2006 that asks you to answer the question "What are you doing?" in 140 characters or less and then distributes your answer within moments to anyone on the service who has chosen to "follow" you. Whether or not the immediacy, informality and brevity of these "tweets" are to everyone's liking, the approach has had a major impact on Internet communications. For example, although Twitter was not designed to distribute news, it functions as a grass-roots wire service, regularly beating traditional media on news stories, from earthquakes in China to bomb scares in Chicago. Twitter has only a few million users, compared with the tens of millions of people who use social network Facebook Inc., but it is one of the fastest-growing services on the Web, with a growth rate of 600% over the past year, Twitter co-founder Biz Stone says. The company's growth has not gone unnoticed by investors. Twitter was recently valued at $100 million, and the service has attracted an impressive list of backers in addition to Union Square and Betaworks, including Bezos Expeditions, Charles River Ventures, Digital Garage Inc. and Spark Capital, as well as high-profile angel investors such as Marc Andreessen, founder of Netscape Communications Corp. (acquired by America Online Inc. for $4.2 billion in 1999) and Ron Conway, an early backer of Google Inc. Twitter has spawned a cottage industry of complementary Web applications, such as video blog service Seesmic Inc., a San Francisco startup that has raised $12 million from Atomico Investment Holdings Ltd., Omidyar Network, Wellington Partners Venture Capital and many well-known angel investors. Seesmic itself recently bought a Now Web startup in acquiring Twhirl, which lets users share posts among blogging services. "The question about the Now Web for all of us is whether our friends on Facebook who are more normal people will jump on the trend as well," says Seesmic founder Loïc Le Meur. "I think they will." Twitter, which has suffered outages and other technical problems, still has a long way to go before people outside the early-adopting tech community embrace it. To reach a wider audience, the company must improve its reliability and usability, as even its founders acknowledge. "The service is growing really well despite really horrible user experience speed bumps," says Stone. "Once we remove those, user activity and growth will really soar." Despite their growing popularity, companies like Twitter and Seesmic confront a key issue: Nobody has yet figured out how to make money out of the Now Web. Twitter has drawn fire for lacking a real business model. Wilson's answer? Be patient. "It would be naive to assume that the management teams of Twitter or FriendFeed or Disqus don't have four or five strategies for monetization in their business plans that they are evaluating," Wilson says. "Just because people aren't currently executing a business model doesn't mean they don't have two or three they are ready to turn on at the right moment." Still, even the faithful admit there is much uncertainty. "It's hard to tell how things will break down," says Paul Buchheit, co-founder of FriendFeed Inc., a Mountain View, Calif., service that gathers material from social networks and microblogging sites based on content consumed by people you identify as "friends." Earlier this year, Buchheit led the startup's $5 million Series A round of funding, with Benchmark Capital also participating. Buchheit, a former Google engineer who led the search company's development of Gmail, argues that many were skeptical of Google's business, at least initially. It took time for the search titan to develop an effective advertising system, he notes. Its successful AdSense ad platform was the fourth one Google tried. Buchheit is keeping the faith that there is gold buried in the Now Web mountain, but admits, "We're not sure how to get it. We're using different explosives and mining techniques, and we'll get it if we just hold out long enough." Skeptics also question the Now Web's ability to spawn full-fledged, sustainable, companies. The acquisitions of Summize, a search engine startup backed by Betaworks, by Twitter and Twhirl by Seesmic may indicate that many of today's startups are ginning up mere product features that will be swallowed up by bigger players. "Some people think Disqus is just a better commenting service, and maybe they're right," says Wilson, referring to the blog commenting technology from San Francisco's Big Head Labs Inc. in which Union Square has invested $500,000. "But the company that defines and owns commenting in a user-generated way--like YouTube owns video and Flickr owns photos--may be able to build a company around that. We'll see. We may wake up five years from now and find that these are companies."
Comments
From: Mary Kathleen Flynn,
Marc, Thanks so much for sharing your thoughts. I enjoy your Budhist approach to the Now Web. :) It will be interesting to see how Disqus evolves over time -- and if it will become more Now Web. All the best,
Posted on:
September 14, 2008 6:33 PM
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Once thing I find very interesting with the Now Web is that it forces you to deal with information overflow. We have all been submerged by email, and when reading blogs you quickly get flooded by posts from the blogs you add to your list as you find interesting content. So you have to accept that you cannot control this flow. All you can do is plug yourself in once in a while, take what you find when you do, and forget about everything else that you missed. And on the content production side, what you send to the crowd is like a bottle in the ocean. And it works: I have asked questions and got answers from strangers, so there is a value in the system once you have critical mass. You cannot control what happens, you do your thing the best you can and results come out: a good analogy for how a Buddhist looks at life in general...
Having said that, I believe that Twitter and Disqus belong to 2 very different worlds, at least for now.
While I see Twitter as an equivalent of a virtual water cooler where people can come and discuss once in a while (even though some people seem to live there), Disqus is a tool to manage conversations with the blogosphere and engage with bloggers. One is truly in the Now, the other is more in the "building over time".
When a blog is equiped with Disqus, or IntenseDebate (what I have on my blog), you can post comments, track replies but also get more info on the bloggers who commented, what other conversations they have other places, what blogs they publish on. With these tools you can accumulate over time records of conversations and connections with bloggers, you can build your personal intellectual property outside of your own blog and you can build a reputation within the group that emerges naturally from all these interactions.
And Twitter is a good complement to let the crowd now that you are doing all these things.
So for Disqus or IntenseDebate rather than Now Web, I would talk Relationship Management, and the good news is that if they can be categorized as such they are one step closer to the enterprise, and therefore one step closer to cash for the entrepreneurs and their investors.
No question in the end that both will make it to the enterprise, as Yammer demonstrated this week at TechCrunch 50. The way we function within and without the enterprise is changing, it will be interesting to see how far this goes...