Web 2.0 Tim O’Reilly

O’Reilly Media, Inc.www.oreilly.com

TTI/VanguardDecember 1, 2005

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Pattern Recognition

•How many of you use Linux?

•How many of you use Google?

•What’s being missed here?

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The "Killer Apps” of the New Millennium

CraigsList

Wikipedia

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What do these apps have in common?

CraigsList

Wikipedia

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Information Businesses

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Software As a Service

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Harnessing Collective Intelligence

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Web 2.0

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How Many of You Have O’Reilly Books?

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What We Really Do At O'Reilly

•Find interesting technologies and peopleinnovating from the edge

•Amplify their effectiveness by spreadingthe information needed for others tofollow them.

•Our goal: “Changing the world byspreading the knowledge of innovators.”

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Watch the Alpha Geeks!

Rob Flickenger and his potato chip can antenna

• New technologies first exploited by hackers,then entrepreneurs, then platform players

• Two examples– Wireless community networks

predict universal Wi-Fi– Screen scraping predicts web services

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"The future is here. It's just notevenly distributed yet."

--William Gibson

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(Control by API)

Desktop ApplicationStack

Proprietary Software

Hardware Lock InBy a Single-Source Supplier

System Assembled fromStandardized

Commodity Components

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Free and Open Source Software

Cheap Commodity PCs

Intel Inside

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ProprietarySoftware As a Service

Subsystem-Level Lock In

Integration of CommodityComponents

Internet ApplicationStack

Apache

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"The Law of Conservationof Attractive Profits"

"When attractive profits disappear at onestage in the value chain because a productbecomes modular and commoditized, theopportunity to earn attractive profits withproprietary products will usually emerge atan adjacent stage."

-- Clayton ChristensenAuthor of The Innovator's Solution

In Harvard Business Review, February 2004

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Six Rules for SuccessfulWeb 2.0 Applications

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1. Users Add Value

The key to competitive advantage in internetapplications is the extent to which users addtheir own data to that which you provide.

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Remember What I Said Earlier?

Hackers are “lead users”who tell us where thefuture is going.

Companies apply theirinsights in new contextsto build next-generationproducts.

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Listening to Linux and Open Source

• Architect your software in such a way that it canbe used easily as a component of a largersystem. (Architect for participation!)

• Grant a license that does not hinder such acombination.

• Let developers “scratch their own itch” bymodifying or extending the software.

• Release early and release often.• Set up mechanisms for users to submit bugs

and patches. Promote your most active usersinto roles of greater responsibility.

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Listening to eBay

• Business Week: ”Upwards of 430,000people in the U.S. alone -- more than areemployed worldwide by General Electric Co.and Procter & Gamble combined -- earn afull- or part-time living on eBay”

The users ARE the application!

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Listening to Google• Google leverages millions of independent linkers

via PageRank algorithm, AdSense

• Business model monetizes “the long tail” ofinternet advertising

Source: Wired Magazine

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Amazon - JavaScript

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BN - JavaScript

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CraigsList

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WikiPedia

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MapQuest - the counterexample

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MapQuest - The Counter-Example

• Another killer app of Web 1.0• Didn’t add user content• First Yahoo!, then MSN, then Googleintroduced competing properties using thesame underlying data

• No increasing returns or network effects

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1. Users Add Value

The key to competitive advantage in internetapplications is the extent to which users addtheir own data to that which you provide.

Therefore: Don’t restrict your “architecture ofparticipation” to software development.Involve your users both implicitly andexplicitly in adding value to your application.

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2. Network Effects by Default

Only a small percentage of users will go tothe trouble of adding value to yourapplication.

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Listening to Napster• Building on top of open source, Yahoo! pays

people to build their directory

• Learning from open source, DMOZ/OpenDirectory and Wikipedia use volunteers

• Implementing one of the deep trends behindopen source, P2P file sharing users build songswapping network as a byproduct of their ownself-interest

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2. Network Effects by Default

Only a small percentage of users will go tothe trouble of adding value to yourapplication.

Therefore: Set inclusive defaults foraggregating user data as a side-effect oftheir use of the application.

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3. The Perpetual Beta

When devices and programs are connectedto the internet, applications are no longersoftware artifacts, they are ongoing services.

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3. The Perpetual Beta

When devices and programs are connectedto the internet, applications are no longersoftware artifacts, they are ongoing services.

Therefore: Do not package up new featuresinto monolithic releases, but instead addthem on a regular basis as part of thenormal user experience. Engage your usersas real-time testers, and instrument theservice so that you know how people usethe new features.

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4. Software Above the Level of aSingle Device

The PC is no longer the only access devicefor internet applications, and applicationsthat are limited to a single device are lessvaluable than those that are connected.

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Listening to ITunes

iTunes

• Software above thelevel of a single device• Database back end• Web services-enabled (CDDB)• Rich client front ends• Mobile device support• Rendezvous-enabled

• Not yet collaborative• No "architecture ofparticipation"

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4. Software Above the Level of aSingle Device

The PC is no longer the only access devicefor internet applications, and applicationsthat are limited to a single device are lessvaluable than those that are connected.

Therefore: Design your application from theget-go to integrate services across handhelddevices, PCs, and internet servers.

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5. Data is the Next “Intel Inside”

Applications are increasingly data-driven.

Therefore: Owning a unique, hard-to-recreate source of data may lead to an Intel-style single-source competitive advantage.

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Google Maps/Navteq

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Google Maps again

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Own the Namespace

Some data is a commodity and impossible forany one party to own, but access to the datacan be controlled through legal means.

Therefore: If you can’t own the data, own the namespace or registry for the data.

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6. A Platform Beats an ApplicationEvery Time

•Lotus 1-2-3•WordPerfect•Netscape Navigator

•Excel•Word•Internet Explorer

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Two Types of Platform• One Ring to Rule Them All

• Small Pieces Loosely Joined

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Small Pieces Loosely Joined

• An architecture of participation means thatyour users help to extend your platform

• Low barriers to experimentation mean that thesystem is "hacker friendly" for maximuminnovation

• Interoperability means that one component orservice can be swapped out if a better onecomes along

• "Lock-in" comes because others depend onthe benefit from your services, not becauseyou're completely in control

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6. A Platform Beats an ApplicationEvery Time

Web 2.0 applications are built of a network ofcooperating data services.

Therefore: Offer web services interfaces andcontent syndication, and re-use the dataservices of others.

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Google Maps + Craig’s List

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Google maps + flickr

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“I’m an inventor.I became interested inlong term trends becausean invention has to makesense in the world inwhich it is finished, notthe world in which it isstarted.”

-Ray Kurzweil

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