O'Reilly: Well, obviously this is a market with a lot of froth in it already. I have to say there are a lot of me-too products and companies. Yet another social network, of the 15th flavor -- that's common in every new technology revolution. There are imitators who have marginal improvements.
One of the companies that's going live on Monday is Spock, which is a people-search engine. It's really, really impressive. It's thinking about whether there are other classes of data to which search hasn't really been applied.
That goes back to a major theme of web 2.0 that people haven't yet tweaked to. It's really about data and who owns and controls, or gives the best access to, a class of data. Amazon is now the definitive source for data about whole sets of products -- fungible consumer products. EBay is the authoritative source for the secondary market of those products. Google is the authority for information about facts, but they're relatively undifferentiated.
Why did Google, for example, recently decide to offer free 411 service? I haven't talked to people at Google, but it's pretty clear to me why. It's because of speech recognition. It has nothing to do with 411 service, it has to do with getting a database of voices, so they don't have to license speech technology from Nuance or someone else. They want their own data stream.
O'Reilly: Absolutely. Anybody who thinks that this is about Ajax is completely missing the boat.
I do think building rich internet applications is an important part of web 2.0. I don't want to dismiss it, because we are able to build richer application platforms today. But it's ultimately about network effects, and where do you build services that get better the more people use them? And it's also about the databases that get created as a result of those network effects.
As far as I'm concerned, web 2.0 is still in its really early stages, and the reason is because the data isn't all owned yet.
The network-effects play is about how you get increasing returns by everybody using your stuff, which is really what Microsoft did on the PC. Here we see it again, where these are winner-takes-all games. The internet looks like an open platform in the beginning, but once somebody gets a lead, their service gets better fast enough, if they've harnessed all the right levers, until it becomes a real barrier to entry.
Why, despite many attempts, have we seen nobody able to dethrone eBay? Well, it's because there are network effects at work in auctions. You have a critical mass of buyers and sellers. We're seeing that with Google AdWords -- it's just a bigger and better marketplace. There are these tipping points where these services really become monopolistic.
We're still trying to move people toward really understanding what that new world looks like. I don't think a lot of people are there. A lot of people still think, "Oh, it's about social networking. It's about blogging. It's about wikis." I think it's about the data that's created by those mechanisms, and the businesses that that data will make possible."