Web 2.0 Becomes Big Business.

There were some large moves in 2007. While the housing boom crashed and the dollar lost its value, oil prices soared, alternative energies increased and web 2.0 became big business.

Web 2.0, featuring sites that foster interaction among users, emerged in 2006 as the Internet’s white-hot growth sector and added to its momentum in 2007.

Nothing symbolized the explosive growth of Web 2.0 better than social-networking site Facebook’s astonishing trajectory from its launch in a Harvard dormitory in 2004 to Microsoft’s $240 million investment in October, valuing the company at $15 billion.

“When they started this company, they just thought it would be fun. … People thought what a cute idea,” said Amrit Williams, chief technology officer at BigFix, an Emeryville security software company. “Suddenly they get (valued) for billions of dollars.”

Other Web 2.0 sites that attracted big attention in 2007 include video-sharing site YouTube, bought by Google last year for $1.65 billion; Wikipedia, the nonprofit online encyclopedia; and MySpace, owned by Rupert Murdoch’s News Corp., still the largest social-networking site. Below this elite were second and third tiers of hundreds of sites.

Web 2.0 sites, with sensibilities that appeal to the under-35 lifestyle, are attracting users at a phenomenal pace. Facebook had 22 million visitors in November, up 89 percent from November 2006, according to Nielsen Online. MySpace had 57.4 million visitors, a 7 percent increase.

Even though capital is pouring into the sector, it’s far from certain how many Web 2.0 businesses will succeed. Many of them depend on advertising, and it remains to be proved how well Web 2.0 will perform as a marketing platform.

“What the advertisers were looking for in 2007 was beyond the traffic numbers,” said Kurtis Fechtmeyer, managing director at East Peak Advisors, a Greenbrae investment bank. “There was a bit of ‘Prove it to me in hard analytics that you’re getting to people I want to reach.’ ”

Resource

San Francisco Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/12/30/BUO2U5G8Q.DTL