Decius wrote:

"Web 3.0 is taking what we've built in Web 2.0—the wisdom of the crowds—and putting an editorial layer on it of truly talented, compensated people to make the product more trusted and refined."

Its amazing to me what venture capitalists can be convinced to invest in. Clearly, large sums of money are not distributed generally to people who know best what to do with them. Here are some rules for you.

1. If the first place you hear about a hot new technology trend is the pages of Newsweek, this either means that you don't know much about technology, or its a bunch of fluff generated by marketing people that will have no real impact on anything.

2. The Internet will never be better than mass media at doing things mass media is good at. In general, the Internet is good at enabling more participatory media that produces content which meets the interests of narrow audiences. The Mass Media is good at presenting professionally produced information that meets the interests of a wide audience.

3. Revolutions in technology are generally driven by changes in technology. The change in technology that enabled more participatory media hasn't prevented less participatory media from being created. The creation of new "less participatory media" is not a technology revolution because it is not enabled by a change in technology. It was possible to do that all along.

While it is certainly the case that there are good business ideas that aren't based in technology revolutions, they certainly shouldn't be sold as technology revolutions if they aren't technology revolutions, and they shouldn't be expected to impact society in the same way that technology revolutions do.

This is the corner that the VC industry painted itself into with retail dot com companies. Webvan, for example, was not a new technology. It was a grocery store. The economics of it worked like the economics of grocery stores, and it was competing in the already saturated, low margin grocery store market. It was not a bad business idea, but it was also not a software company and the core mistake made by its investors was to assume that it would behave like a technology revolution behaves.

You wouldn't be the first (or last) person to point out that VC's know very little about running a business or even really about managing money. They are programmed to look for specific growth rates using a variety of techniques. One very common technique is sector betting, which is really just a nifty term for lemming like behavior (if Kleiner's doing it, we should do it too!). It's the same behavior that record labels engage in when a band from a town breaks into the mainstream. Every other band in that town that sounded like the first band gets signed too.

Your point about Webvan is correct, but the thinking wasn't that it was a software company and should act like one. The thinking was that it was going to leverage technology in a way where it's growth rate would be greater than that of a saturated low margin grocer. There's a premium associated with that growth rate, although back in those days, that premium was on crack.

The whole Web 3.0 is coming because no one has figured out how to make money in Web 2.0 other than to sell to Google or Yahoo or Microsoft. It should be an outrage to anyone that companies have gotten multi-billion dollar valuations based upon YOUR work. User generated content is getting monitized twice. Once for the content itself and the network effect it has, and then again on the ad revenue from the traffic. That's bullshit if you think about it.

Web 3.0 SHOULD be about trust and establishing credibility around contributors. There's gold in that. But anyone who's spent 15 minutes on Memestreams knew that in 2003. =)

RE: Is User-Generated Content Out? | Newsweek Technology | Newsweek.com