[I don't normally post entries about other people's blog entries, however this relates to a topic that I've meant to cover for some time.]

Caught an interesting blog entry about Web 2.0 hype via Reddit the other day, and thought it worth a mention. It's a rather cynical take on the current "Web 2.0" phenomenon, noting that many of the recent Web 2.0 sites and services have no rational current or future business model.

To recycle a rather dated joke--

1. Make a really cool AJAX-equipped, streaming-video website with das Blinkenlights
2. Get lots of visitors and users
3. ???
4. Profit!

This is happening to a scale not seen since the disastrous .COM bubble of 1999-2001, and many of the rising stars of the internet world seem to exist purely in the hope that Yahoo or Google or Microsoft will snatch them up for tens of millions in their quest for Internet dominance. Sometimes it really does happen.

Most of us would love to be on the cheque receiving end of such an acquisition.

Being a software developer, entrepreneur, and technology consultant, I've been in contact with a lot of people who dream of branching out on their own, making their own killer software application or hugely popular web application. They imagine how they'll be sitting on the pile of lucre when the Adsense revenue and subscription fees start pouring in, or when the huge buy-out cheque comes in the mail, all while enjoying a reputation as a technical genius (or, in common media parlance, as an "internet whiz").

I offer my support and encouragement for their plans, but temper it with a bit of skepticism. My doubt arises because 9 times out of 10, or more like 97 times out of 100, their plan involves--

• Making a killer web application for geeks to hang out. Maybe make subscription levels and members only areas for revenue
• -or- Making cool component libraries for software developers, maybe some cool AJAX-like components
• -or- Making tools for the software development community (bug tracking, process management, etc)
• -or- Making cool web development tools, like an aggregator to mash up all of the Google Maps and Flickr photos with Amazon ISBNs
• -or- Something else to cater to the technically adept geek community.

This is what they know, so naturally they want to spin their observations and experience directly into business success. Whether they're pro-bloggers, or elite software developers, they feel that they know the needs of the market -- they know the itches that need scratching -- not to mention their natural desire to earn some credibility among their peer group of geeks and developers.

There are a number of problems with this plan.

• Every other software developer/web app creator is thinking and doing exactly the same thing: A small market is being grossly oversupplied by for-profit ventures, not to mention a huge cadre selfless gratis/libre advocates.
• The target is, on average, a smarter crowd. Smarter not only in general intelligence, but more importantly in the specifics of the products and technologies that you're offering.
• This target market has been observed as being very thrifty (just ask how the tip-reliant in Las Vegas felt about Comdex).
• A sad reality is that some of the target market resents seeing peers financially succeed. If you make a commercial product or solution, expect your forums to be overloaded with the resentful pointing out every marginally related open source competitor or freeware. Expect users to claim their constitutional right to use your information and services free of advertisements and restraints.
• The target market is technically capable of circumventing ads, copy protection, and just about everything else you might throw up to earn or protect revenue.
• The market is being conditioned to believe that software and services should be free (as in beer), or at least the costs should be submarined into something else.

This isn't to say that revenue isn't possible -- there are quite a few solution providers and websites doing very well targeting the developer/geek audience -- but instead is just an observation that it's one of the most difficult markets to tap. While many other domains sit underserved with a client base open and willing to paying fair rates for solutions, most dreaming software developers still peg their dreams on building the next Slashdot or tech aggregator or AJAX component suite or SQL formatter.

Software developers wage war over their saturated marketplace, building marvels of technical excellence in hopes of getting a piece of the table scraps, all while ignoring the much larger market (one in which people are actually paying $0.99 a day for a service to SMS jokes to their cell phone. In the tech world you can expect a fight to the death if a site demanded a $5/year subscription fee). I marvel seeing many of the simplistic, technically-deficient solutions yielding huge returns in other domains -- earlier today I had to deal with a widely used "business group membership" product, and I was astounded to see the enormous fees that went along with a subpar, circa-1995 era solution.

A week or so I mentioned a desire to build a Firefox extension to perform site-specific time tracking and blocking. I also commented that "obviously extensions aren't a potential revenue market". Not ever project has to be a revenue project (there are greater rewards than monetary rewards in many quests), however not everyone agreed with my assessment.

[as an aside, a user comment noted that there is a recently released extension called TimeTracker, which displays your daily total browsing time. While that product is extremely basic right now, it does discourage me from continuing on my extension quest -- I don't want to interfere or seem to "rip off" the obvious growth path of TimeTracker]

My reasons for believing that the extension market isn't a viable revenue market are largely documented above. The only current revenue model for extensions, I believe, is by serving a master other than the user (e.g. Adware/spyware, or as a branch of a much greater service such as Google and their Google toolbar).