Jason Zielke

Dillon Kane Group

Headstand Media
333 W. Wacker Drive
Suite 850
Chicago IL 60606
o: 312.768.7450
Venture Dollars as a Predictor of
Web 2.0 Sustainability
 “Venture Dollars”
•Industry Dynamics
•Motivation
•Strategy
•Types
•Trends
 “Web 2.0”
•Platforms
•Collaboration and Complements
•Tagging and Categorization
•Social Media
•Blogs
•Texting
•Video Services
•Microblogging
•Aggregators
•Events Networks
 Web 2.0 - Puzzle
•Name two companies for each
attribute
•How do they make money?
 Model or Mass
•“Should Web 2.0 Companies focus on a
business model right away or focus on
getting the critical mass?”
 Two Views on Origin

•Business model is not important

originally
•Must have model from day one
New Ideas or New Technologies

•Innovators Dilemma
•Adopters and Imitators
 Challenges for Sustainability
•Speculative revenue models
•Shifting interest in VC community for
biotech and energy sector
•Staying relevant beyond a fad
•Fun and cool don’t make money
•Integration and collaboration
•Ease of use
 Challenges for Sustainability
•Very low entry barriers
•Identifying competitors
•Must identify new ways to monetize
traffic
•How do you value a critical mass
 Emerging Business Models
•Promotion (e.g. Radiohead)
•Platforms and collaboration
•Sponsorship (NBC/YouTube)
•Value added services (complementors)
•Online games
 Good and Bad News
•Incumbents buy Web 2.0 companies 
•There aren’t enough incumbents 
•Operating and startup costs will
continue to decline 
•Same for competitors though 
•Opportunities to continue to reduce
pain points with consumers 
•Social “norms” could revert 
 Good and Bad News
•Blogs attract $50-100M/year 
•Advertising spending projections will grow beyond
$11BN by 2010 
•Video services projected to grow to $1.7BN
annually by 2010 
•How can one compete against the incumbents? 
•Critics argue that many Web 2.0 companies are not
sustainable businesses “because they merely float
upon the speculative bubble of venture capital
investment in Web 2.0 companies” Technology
Review, Dec 2007
 Venture Funding and Web 2.0
•VCs want 20% returns on their money
•Impossible to predict the next great website
•There are only so many proven entrepreneurs
•Competing interests (mobile, biotech, clean tech)
•Function of liquidity – VCs want to cash out
•Deals are smaller, and transaction costs are higher
•Two thirds of VC backed companies have zero
returns (May 02, 2007 – Knowledge@Wharton)
•Free rider effect
 References
The Innovator’s Dilemma Christensen (1997)
“Global Venture Capital Investment in Web 2.0 Companies on the Rise”; Ernst&Young/Dow Jones
VentureOne (March 21, 2007)
“Venture Capital Firms Set Their Sights on New Ideas – Not New Technologies” (
http://knowledge.wharton.upenn.edu) August 8, 2007
“Social Computing, Friend Spam”; Technology Review (MIT); December, 2007
“Venture Capital Strengthens While Private Equity Slumps”; Business Week; Dec. 31, 2007
“The Scobel Show”; Fast Company; Dec 2007
“The Big Tease”; Fast Company; Dec 2007
“Venture Capital Investment in Web 2.0”; (http://consultaglobal.wordpress.com/2007/09/27)
“Strategies For Being A Platform Leader”; MIT Sloan Management Review; Oct. 26, 2007
“VC in the OC”, National Venture Capital Association; Sep 12, 2007
www.fuordigital.com
www.simpartners.biz
www.adgooroo.com
www.omniture.com
www.marketleap.com
www.semphonic.com
www.comscore.com
Select Web 2.0 Companies and Products
Platforms
Amazon, Facebook, Ebay, Mechanical Turk
Collaboration and Complements
Wikipedia; AngiesList; Aggregate Knowledge; Google Knol
Tagging and Categorization
Digg; Clipmarks
Social Media
Yelp, Pownce, Flickr
Blogs
Techcrunch
Texting
Southwest Airlines
Video Services
YouTube; 5min
Microblogging
Twitter, Jaiku, kyte.tv, Facebook
Aggregators
Digg; Participate Media; Real Clear Politics
Events Networks
Eventful, Meetup, Socializr