Web 2.0: Lies, Mystery, and Opportunity Rolf Skyberg [email_address] Disruptive Innovator for eBay, Inc. Monday, 16 June 2008

I often get asked:

“ what exactly does a disruptive innovator do? ”

I am tempted to say,

I innovate,

disruptively.

but that’s simplifying things.

I do innovate disruptively,

but I also have the roots of an evangelist,

and it’s in the combination of the two,

that I can be most effective.

sometimes, my disruption is the innovation

sometimes, my innovation is the disruption

more to the point,

the wider I can spread new ways of looking at the world,

the more disruption I can cause, by proxy.

and hopefully, that disruption

starts with you.

last year I told you about

horses,

radios,

birds,

dishwashers,

and France.

this year will be

no different.

I also told you

that you should sell hotdogs,

imagine the social aspects of your business eat shop

and to stop being fascinated

that your toilet is internet enabled.

of course, not to mention,

my favorite slide

the electric jock strap.

this year I'm going to tell you a new story

twice as shocking as the electric jockstrap,

and no less important.

it starts, now:

The Lie (we all wanted to believe)

the title of my presentation last year was:

"Web 2.0: Why We Got Here and What's Next"

I remember thinking as I stood before you

"well isn't Web 2.0 a little dated?

“ isn't it kinda already over?"

but based on the reception I received,

the message that I gave was right on target.

I'm going to start this presentation

by reminding you of last year's message,

"Web 2.0 is great and all,

but it can be even better if you fulfill needs.”

perhaps the part of the previous sentence left off

is the why .

of course it's implied:

by fulfilling needs, you increase your business

and therefore profit.

but what if you're not generating any profit in the first place?

what if you’re just starting out?

is Web 2.0 still the path to riches?

this morning I'm going to paint you a picture

of where others have left off

and your opportunity begins.

maybe I should have entitled this session:

Web 2.0: show me the money

so let's start with a story:

since ancient times

it was known that rubbing a piece of amber jewelry

with a patch of fur

could create an electric shock

specifically, the rubbing would create static electricity.

an imbalance of electrons + + + + + + + _ _ _ _ _ _ + _ _

+

wanting to “jump back” from where they came from. + + + + + + + _ _ _ _ _ _ + _ _

you've probably been shocked

when exiting your car

even though your seat is not made of amber,

and your backside is not covered in fur.

for a long while,

static electricity was regarded as a curiosity:

something known, but not understood.

in the 1700's experiments started in earnest

and scientists got pretty adept at creating a charge

but they still didn't know what to do with it.

so, they took turns igniting tins of alcohol,

shocking themselves and each other,

lining up monks in a mile-long row

and shocking them,

shocking birds and beasts at a distance,

and even lining up 900 soldiers

having them hold hands

and shocking the wits out of them

for the amusement of the royalty.

electrity was great,

a fun party game

but what to do with it?

they made all sorts of fascinating devices

some for shocking

some for sending sparks shooting across the room

one was a tiny cannon you filled with swamp gas,

corked the end, and ignited with a spark.

heady with passion of the era,

embracing both the ducats

and the time's discoveries,

these illustrious researchers

created a series of fantastic contraptions.

their elaborate machines

were financed by the kings and queens,

or lords and barons

(some of whom they were themselves)

and often drew a large audience,

or at least the consternation of popes.

and yet, electricity was still a novelty:

while these machines might be good

at making dead frogs dance,

hardly was this a path to riches.

the real value of electricity

wouldn't be known for another 150 years,

when someone figured out how

to turn it into a reliable light source.

shocking each other was amusing

for a century and a half,

but darkness itself was the problem electricity was to eventually solve.

let me tell you another story

with a similar beginning,

and a twist near the end.

in the dark days following the first dot-com bust

the world was flush with opportunity:

massive investment

in internet-delivered dog food

was now sunk cost

and the raw materials for growth

were abundant.

one raw material was the trained professionals

and as you would expect:

with no dot-com to boom,

they were bored.

the curious among them started picking up the pieces

mashing them together in interesting ways

and creating new fantastic machines.

eventually they needed help,

and additional dollars,

and it wasn't long before the engineers and VCs came

attracted by a hunger

to be part of the next big thing.

the gadgets with promise

attracted the most attention,

and collectively began to take shape.

whatever that thing was with the old web,

this new one is awesom r !

instead of watching dead frogs dance

you could view numa numa dance on YouTube

let your friends know through Digg,

bookmark it with del.icio.us,

spam your contacts on their myspace wall

all while snapping photos of their reaction

to then post on Flickr

and what was the twist?

lumbering giants of the first internet age awoke

reached for their wallets

and plonked down fat stacks of cash.

these new startups should fit nicely

with their existing cash streams.

suddenly, the new exit strategy wasn't an IPO

it was getting bought out.

create a machine that's fantastic enough

and somebody wealthier than you

will step in and make your dreams come true.

yippeee!

massing their arsenal,

the remaining entrepreneurial among them

smelled the fortune and dove in with both feet.

the lie we all wanted to believe

was that all it takes is a quirky idea,

grab some pieces,

and a whole lot of pastel graphics.

then,

step 4 profit!

and perhaps it wasn't a lie really,

nobody told us that we'd attain fame and fortune

but we hoped,

we believed.

we watched a lucky few come up all cherries

in round two of the web.

yet some held back

“ I don't get it,” they'd say

“I don't believe it,” said others.

the skeptics were unswayed by the new web

at lunch time, the old guard and new guard would spar:

"how are you going to make money showing videos on the internet?"

"doesn't matter!” they reply,

"we'll just put some ads on it!"

and therein lay the mystery:

if the coffers of Web 1.0

wouldn't cough up the cash for all of their projects

how were they going to make money?

it's wonderful if you can create: the next social network around categorizing and tagging media via your mobile phone

but is anybody going to pay to use it?

The Mystery (of what to do next)

problem was,

many of these fantastic machines

were novel toys,

stunning in their own right,

but still largely

flights of fancy.

they were solutions without problems,

or at least:

solutions without problems people would be willing to pay for,

yet.

how do you monetize something never designed to make money?

if cash flow wasn't part of your original objectives,

it's unlikely it will exist in the final product.

to understand the future, we must look to the past,

the pieces that I've been mentioning

are ones you should all recognize,

in fact, I mentioned most of them last year.

what's interesting is to understand how they fit in context.

Web 1.0 pushed our technology hard

and we saw giant improvements in big databases and cheap connectivity.

the databases gave us a place to put all our stuff,

and the connectivity let us get it back out again.

the ability for users to upload created a flood

from niche markets,

amassing us something to "put" in our new services,

and creating a sense of purpose.

surely all these people

with all this stuff

must need services!

throw in the next generation of

synchronous and asynchronous communication

and you've got some "life" around stuff,

there are people here and it's interesting!

these five pieces laid the groundwork for the next five:

major websites built names around the voting and ranking of content,

delivering the "best" stuff to the most people.

on the fast, cheap storage

we had plenty of space to squirrel away

rich resources like photos and video.

and once we had the interesting stuff to watch and view,

the technological cleverness of AJAX

let us achieve this without hassle

and also stream this across the web,

via embedded widgets.

other major building blocks

are the creation of reputation over time,

mass-user editable content,

social networking functionality,

pushing info out through feeds,

or aggregating it in,

and embracing the mobile world.

so imagine this petri dish of a world

and what happens when you let it grow…

flickr is built of these parts

so is YouTube,

Wikipedia,

Digg,

and Facebook.

they all share a common DNA

and their success would have been impossible without it.

this world was flush with investment and enthusiam,

everyone pumping the environment with hopes and dreams

it's not suprising to assume,

"surely you could do something with these pieces?"

and of course you can build fantastic machines

and they can solve real-world problems,

but this isn't quite the real world, is it?

these fantastic machines,

these weird creatures,

evolved in a world

where they didn't have to make money ?

?

where the bottom line, was more of a

"hazy area".

so where do you come in?

what hope are we left with to make a buck?

The Opportunity (before you)

in the wake of 2.0 fervor,

opportunities have multiplied.

while some might regard Web 2.0 as an interesting,

if ultimately over-hyped era,

the clever among us don’t see the opportunity lost,

but found.

if you attempt to extrapolate

the current group of Web 2.0 products,

you get a very skewed conception of making money.

lack of monetization pathways

doesn't signal there's no future,

but it does signal that the present is not a good indicator

of what's to come.

just like web 1.0,

the 2.0 era included massive investment,

and some of the work of our generation's best minds.

the relative rarity of new millionaires

doesn't imply the work done was for naught.

because as the hopeful were toiling away

crafting elegant and useful solutions

to problems in their own special spheres,

they were also sharing their solutions

though open source and open platforms.

and what we're left with is an incredible wealth,

of potential solutions.

so let's examine a few of the pieces

to give you an idea of what I'm talking about:

RSS feeds

what we think they do: keep us updated on the latest news

what they actually do: represent a uniform, user-controlled method of staying informed by providing a conduit to share information asynchronously across multiple platforms

(this is a big deal!)

opportunity fields: marketing, CRM, inventory management, metrics reporting

voting

what we think it does: allow users to rank the "most popular" of items

what it actually does: with the right algorithm, separate the good from the bad

opportunity fields: spam filtering, fraud detection, market research, collaborative creation, data normalization, taxonomy bootstrapping

AJAX

what we think it does: cool stuff on the web

what it actually does: reduces operator fatigue, reduces wasted bandwidth, is a bridging tool between the document-based web and the next

opportunity fields: personalized experience, live data integration, visualization and creation, navigation and click-through activity tracking, web-application creation

social networking

what we think it does: spam your inbox with vampire invites

what it actually does: create "protected spaces" with in-built relationship roles and de-facto whitelists where members express themselves in often machine-parseable ways

opportunity areas: CRM, marketing, opinion research

mobile

what we think it does: shows me tiny, painful little websites

what it actually does: provides an always-on real-time bi-directional portal to the rest of the world, usually within 36 inches of the user, capable of monitoring physical location, capturing voice, video and photo

opportunity areas: (can you even begin to imagine?)

your opportunity

is to find the problems

these solutions solve.

everyone in this room should know

who wants these solutions.

the people who want the answers,

want the processes,

are the people who can afford to pay

because it's not an expenditure to them,

its an investment.

a rich new set of problems is waiting to be solved,

and two major types of opportunity abound.

if you want this all as a simple graph

get out your pencils:

we start with a line:

now add web 2.0, draw your favorite fantastic machine

and there are two stops in the middle:

let’s label them for now:

let’s label them for now: ? !

? !

oh, and we need a goal. ? !

add in your favorite of your choice: ? !

? !

on one side, we have the fantastic machines ? !

on the other side, we have the businesses with problems. ? !

notice how far apart Web 2.0 and the money are ? !

because we forgot about that detail in our excitement. ? !

businesses will reward you, ? !

if you can flow through points one and two. ? !

so what’s Point One?

disassemble the fantastic creations of crazy inventors

test the parts independently

and characterize their output,

then implement them again,

and make them your own.

technological sophistication has increased at a such a rate,

few (if any) know the latest and greatest

in scope or capability.

bridging the gap between the unknown and known

is a valuable ability worth paying for.

after we know what the pieces are capable of

we can speak of their abilities with familiarity and confidence

“ I know that if we did X on our site, it would be so much better,”

“ do you know how to do X? Can you do it for us?”

“ Absolutely ,”

you reply with a swagger.

but Point One and a swagger only gets us half way there.

Point Two is where the real brilliance shows up.

after you know what these parts can do

its your opportunity to find the problems they fix.

“ I know that if we did X for your company, it would be great,”

“ and it would make you Y dollars,”

“ all it takes is for you to sign here…”

anticipating the needs of your clients

and delivering on them

because you understand their business

can create profound loyalty

(and revenue)

there’s no need to seek new Web 2.0 dragons to slay

when there are plenty of yaks to be shaved right nearby.

and remember,

because a lot of these technologies

came from the creative minds of people with no money

they often solve problems in uniquely cost effective ways.

not only do the latest gadgets add the shiny-shiny to your site,

there’s also the opportunity for massive return on investment.

so to the web(!) my ladies and gentlemen,

start accepting those vampire invites,

(but only to dissect them)

voting on that news,

(to see if you can game the algorithm)

and sign up for a Twitter account,

so you can “Tweet” and not feel funny about it.

the world awaits,

and some of them have the cash to distribute,

if you can make them more.

Thank you for attending, (especially after lunch)

my best of luck in attacking points One and Two,

and I hope you create some fantastic money-making machines in the process.

The End.

Rolf Skyberg Disruptive Innovation, Team Lead [email_address] http://rolfsky.com twitter: @rolfsky

Thank you to: Lawrence Lessig, for the presentation style Dick Hardt, for the inspiration Inkscape, for a wonderful vector graphics tool my lovely wife and you, (yes you), for coming

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Rolf Skyberg [email_address] http://rolfskyberg.wordpress.com Share, reuse, and remix this talk These slides are available under the Creative Commons Attribution-Noncommercial-Share Alike 3.0 License.