Web 2.0: a technology foundation for free-markets

I believe Web2.0 can describe a set of technologies to support the immense popularity and growth characteristics of free-markets.

Many times the question comes up, what exactly is Web 2.0? Although we are not great supporters of buzzwords that have little real meaning, we are – just this time – tempted to put our big-thinking in the mix.

We believe it describes a set of technologies to support the immense popularity and growth characteristics of free-markets.

Free markets have been in existence at least since 1637, when dutch growers imported Tulips from Turkey and engaged in heavy bidding wars with buyers at the onset of the flower markets. [In the interest of “full-disclosure”; I grew up in Holland].

The Dutch auction (also referred to as “The Essence of Fairness” with respect to IPO markets) was created when ample supply was met with equally impressive demand, and a unique trading mechanism was developed. Apart from the details of the trading options (which eBay has adopted), we want to focus here on the dynamics of the market that are so different from the technology industry in its current incarnation.

The technology industry (still in an immature state) has built success around companies that identify and carve out a one-to-many relationship with customers. Successful companies like Microsoft, Oracle, Cisco etc. staved off early competition and now act as the single asset owner of the technology they sell to many customers, fearing little organic competition. We call them what they are; demi-cartels. A great position to be in and very profitable, but the technology market is about to get a shakeup, not dissimilar to what happened in the flower markets.

The creation and composition of technology assets, whether those assets are applications, databases, code or new media content, is emerging from the hands of specialists into the realm of a much broader set of providers.

Suddenly, the technology industry faces competition it has never seen before. And it is responding by changing its tactics [technology taxonomy in motion], it has to. Oracle loses a big customer because it refuses to put up with fat margins, exorbitant pricing and 20% support fees and makes the switch to a little vendor called MySQL. New online capabilities enable Craigslist, where posting classified ads is free of charge, to hasten the demise of traditional newspaper classified advertising. MySpace takes the need for people to express themselves out of the hands of the specialists.

New many-to-many market models arise and dramatically impact the old rules of the game. New content establishes micro-celebrities that drive the popularity of a free-market technology platform. The Pareto principle is dead (well, not really – its amplitude will change).

So, Web 2.0 is a platform strategy (rather than a proprietary stack) that enables many-to-many relationships between buyers and sellers of electronic assets. When transparency and integrity are key objectives in the creation of these marketplaces, Web2.0, with whatever technologies that represents, actually has a chance of becoming a buzzword we can speak fondly about.


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