Monday, February 5, 2007 Web 2.0 done right

Tim O’Reilly, of O’Reilly Media, defines Web 2.0 as "the business revolution in the computer industry caused by the move to the internet as platform, and an attempt to understand the rules for success on that new platform.” It is the transformation from static one-way delivery of web pages to dynamic, interactive content, pulling from a number of locations across the web. There are many examples of companies calling themselves Web 2.0. The majority are cool and flashy with all sorts of bells and whistles. But what really strikes me is the lack of a clear revenue model. It seems to me that the model most of these firms are going after is acquisition (e.g. YouTube).

All that said there is one firm, which I love, that is getting it right. started out as an online CRM tool but they have evolved into much more. In developing their product they also developed much of the infrastructure necessary to host these new “mashup” applications. recognized this value and opened AppExchange, an online clearing house for third-party developed applications that run on, and integrate with, the platform. Third-party firms have developed tools ranging from project management applications to inventory tracking systems. In exchange for hosting the applications and opening up the developers to their 400,000+ user base, takes a percentage of the license fees.

They are now moving to the next level and have opened AppStore which some are calling the iTunes store of the business applications market. has capitalized on, what I would compare to, the out-licensing strategy that firms across many industries have been employing for decades. Most firms have some patents or other IP that they are using in a specific industry. They’ve learned that there is additional revenue to be had by licensing use of their IP in other industries in which they don’t compete. has recognized that their specialty is CRM, but they have a valuable set of core competencies that can be leveraged by other firms developing other applications for other business problems.

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