The Challenge for Web 2.0 Companies

Aaron Wall offers up some good thoughts on why Most Web 2.0 Companies will Fail. His discussion focuses on the leverage they seem to lack. He ends the post with “The reason most Web2.0 companies will fail is that they are creating entire companies based around a feature to another product, while having no market leverage.”

And, he is absolutely correct. Features do not result in long term companies. Maybe, I said maybe, a company that is based on a feature can create some value and sell themselves at an early point in their lives, but this is just a tough way for an entrpeneur or an investor to make a bet.

One way to think about this is who really has control of the customer? If you truly control the customer, you may have something interesting. The reason I say this is that if you build a product, which is really a feature for someone else’s product, that other company has control of the customer. As soon as they implement the same feature and roll it our to their customers, your business is gone.

Just not a good place to be!


  1. says

    I think this has less to do with web 2.0 and more to do with the low cost of producing features on the web.

    But this doesn’t have to do with web 2.0, as much as websites that siphon traffic and users from the big boys. Will Digg be forgotten? Myspace? Delicious? These are all web 2.0 sites with original functions that built their own user base.

    So I don’t think most web 2.0 sites will get run over by the established sites – just ones that create really useful features, and, like you said, don’t ultimately control their user base.

  2. says

    You hit the nail on the head Eric! For any business to really have some serious success they need to “control the customer”

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