Dec 11, 2009

Web 2.5 Opportunities for New Generation of Web Entrepreneurs

(This article was first published as a guest post on e27.)

I recently launched Taggo, a membership card aggregator and storefront, using a new platform-as-a-service model that is increasingly being referred to as Web 2.5.

With Web 2.0 already mature – think social networking, blogs, video sharing, mash-ups, and a myriad of other applications that facilitate user-generated content – and with Web 3.0’s elusive semantic search capabilities still far off in the distant future, a new term is emerging to describe companies that are starting to fill the gap.

Web 2.5: What is it?
Web 2.5 is about aggregation, personalization, and other tools that help us with our Web 2.0 world now, today. Tech entrepreneurs are using it to develop new types of Web applications at very low cost, using essentially free services that are available thanks to the first two generations of Web companies. Some of these Web 2.5 entrepreneurs are already becoming wildly successful.

Intuit recently paid US$170 million to acquire two-year-old startup, a data aggregation site that lets users consolidate their bank accounts and credit card statements in one place, where they can manage their finances. Trumpeted “the triumph of Web 2.5”, links to bank Web sites to aggregate and filter the customer’s data. The service was created on a shoestring budget. acquired 2 million users in two years with no ad campaign, other than a small amount spent on search engine terms. Instead, they rely on free social media, with 36,000 Facebook fans and 19,000 Twitter followers, a blog, and an iPhone application. had US$10 million in sales when they were acquired – that’s a whopping valuation of 17X revenues. You would think we were back in the good ole days!

The terms Web 1.0, 2.0, 2.5 and 3.0 are mainly jargon of course, since they don’t actually refer to different technical versions of the Web. Nevertheless, they are useful in describing important changes in applications and business models. Web 1.0 helped lay down the initial infrastructure of online business. While many of those players are no longer around, the next generation of Web 2.0 companies built their businesses on the platform created by Web 1.0 entrepreneurs. In turn, with Web 2.5, yet another generation of entrepreneurs is building new services on the Web 2.0 platform.

Platform as a Service
With Web 2.5, we are seeing the emergence of platform-as-a-service, which takes the existing software-as-a-service model (also known as SAAS) to another level. SAAS offers companies the ability to use expensive software at low cost, with no need to purchase in-house equipment, databases and servers. A SAAS application’s features and functionality remain essentially the same as with the traditional software version of the application. Platform-as-a-service provides additional capabilities.

A key element of Web 2.5 is that platform-as-a-service providers manage the customer’s profile data, such as name, address, billing and payment details, etc., and allow developers to create applications that leverage that data. Think Amazon, Google, Facebook and the iPhone app development environments, all of which are valuable to developers in part because of the customer data that these platforms have. Developers can bill customers through the platform provider’s billing capabilities, using credit card information that the customer previously registered. Shipping is easy, with no need to re-capture address details. These are basic ideas, but you get the picture.

A Web 2.5 platform can be generically defined as an aggregation service that simplifies the customer’s life, combined with tools that let developers create applications using the customer’s profile, managed by the platform provider. It does not need Web 3.0’s profiling of the customer’s online purchases, browsing behavior, searches, etc. Basic customer information is already very helpful in creating useful applications today.

That’s a generic definition that can be applied to lots of different areas and completely different applications. Here are several examples.

In the payment space, making Amazon’s OneClick feature available to third-party developers is one example. The PayPal X developer’s platform is another excellent example. And of course developers of iPhone apps enjoy the iPhone’s built-in payment capabilities as well. In the social networking space, Google’s OpenSocial is a set of APIs that lets developers share and access social data.

My own startup venture, Taggo, is an example of applying these concepts in my area of expertise, transaction systems for credit cards, loyalty cards and membership cards. The Taggo platform is used by companies that develop CRM, loyalty, membership and point of sale systems for retailers. This developer community consists of a large number of vertical market systems providers, for the most part local and regional companies that each specialize in one or a few retail segments. Taggo provides the underlying platform that lets customers use their mobile phones to replace lots of plastic cards, while Taggo’s platform users develop the actual systems that power a wide variety of retailer loyalty, membership and prepaid card programs. Four systems providers have signed up as Taggo platform users, covering major retailers in South East Asia, India and Australia and New Zealand. Check out ETP International, Integratech, Memberson and Transactor Technologies. We expect to sign a total of thirty systems providers by the end of 2010.

Here are several questions to guide you in thinking about Web 2.5 entrepreneurship opportunities. These questions are all open-ended and can be difficult to answer. But better that you ask yourself these questions now instead of having somebody else ask them later.

What is your platform all about? So what? Who cares? Who really REALLY cares?

What pain does your platform address? Who has that pain? Is your platform more like vitamins (nice to have to keep away potential future pain), pain killer (needed right away to eliminate pain) or cocaine (addictive, think social networking, gaming, etc.)?

How will you deal with privacy issues? Will any of the customer’s details be shared with application developers? Why will customers give you permission to share their details? If you will not share any information, why will customers trust you to protect their data?

Which developer community will most benefit from your platform? Why? How much will they pay? How will they pass those costs on to their customers? Who are their customers?

Why you? What is your special story that makes this venture something that nobody other than you should launch?

With good answers to all of these questions, you may be on your way to becoming the next Web 2.5 mogul.

No comments: