Back to the Future (B2B)

It seems like everyone is suddenly a B2C, Web 2.0 service driven predominantly by user generated content.  The first wave of B2C plays have hit, delivering strong initial financial success to investors and management.  The blood is in the water and now, as is usually the case in the venture business, everyone is jumping in with both feet. You are seeing several of the pioneers like YooTube (video) and Digg (news) and some later entrants like Tagworld (community) going exponential in their growth. There is also a very long tail of new entrants coming in, taking advantage of the low cost of entry. While the revolution is early, the models are maturing quickly and the fields are getting crowded, making it increasingly difficult to break out from the crowd. Furthermore, there are a handful of logical acquirors (IAC, Yahoo, Google, etc) and once they have either bought or built their own, they will not necessarily be looking for high priced future acquisitions. This is similar to the Web 1.0 phenomenon. By 1998, enough success stories had generated enough copy cats that the chance for success dropped dramatically.

Furthermore, many of these models rely on giving away the service for free to drive rapid adoption while leveraging ad models for revenue. Recessions and slowing economic conditions have a chilling effect on the advertising world. Remember when Yahoo’s revenue dropped 40% in one year from $1.1B to 0.7B in 2001? Additionally, click fraud threatens the engine at the heart of much of this, Google’s and other ad networks’ CPC offerings.

The trick is in going where the puck will be, not where it is today. Enterprise applications are out of vogue. The sales cycles are long and firms can’t fall back on the simple ad-based models driving the B2C world. That said, there are numerous opportunities for proven technologies from the B2C side to migrate over to the B2B world. These include everything from search to social networking to blogging to predictive markets. Corporations don’t like being guinea pigs, so the fact that millions, if not tens of millions of users, have pounded away at technology, helps to reduce the “technology risk” associated with it. Clearly, these technologies will not simply transfer over as corporations are much more demanding and careful in controlling the experience with their customers and employees. Blogs and Wiki’s are two classic examples. They are concerned about rogue participants flaming their products and services or disseminating false/erroneous information.

That said, I predict that we will see a resurgence of B2B services and offerings in the coming year. We are already seeing it with several of our own Web Service infrastructure companies. After years in the wilderness, they are starting to close deals at an increasingly rapid pace.

So, get ahead of the curve. Help corporations adapt the new, promising B2C technologies to their more rigorous business needs. You have a broad array of open-source, web-service and Web 2.0 technologies to mash together in your efforts. There are many areas you can target ranging from customer intimacy & intelligence to location based services to mobile workforce applications to database analysis opportunities. The key is to get out ahead of the pack before it becomes obvious that the worm has turned.

Want to get way, way, way ahead of the pack? Later this week…Quantum Physics. Follow the white rabbit, Neo.