Web 2.0 … It’s last years buzzword for websites that involve some sort of user-generated content (blogs, flickr) or web-based software (Google Docs) or social networking (Facebook) etc. I found the “complete” web 2.0 directory at Go2Web20.net which lists many interesting sites that I’d never heard of. These sites are interesting not because of what they do, but because they haven’t been successful. In fact Go2Web20.net’s directory is more like a graveyard of Web 2.0.

For example, PeopleTrusted.com, “a democracy of trust”. This actually seems like sort of a good idea. It’s a site where people can vote for online retailers and services that they trust. As the site says, “PeopleTrusted helps bring credibility and social reputation to products, services, and companies doing business on the web.” Asymmetric information is a big problem in online markets — it’s easy to set up a website and rip people off. So in theory PeopleTrusted could solve that problem and provide a valuable service. I’ve even written this paper and this paper about exactly that idea. But PeopleTrusted seems tobe having trouble getting off the ground. It has very few members, and very few products have been voted on, so it’s not really a very useful site. I also wonder how prone it is to manipulation? I didn’t check the site carefully enough, but how do they stop people registering fake IDs and polluting their data?

Next up, Yample. I have no idea how they came up with the name ‘Yample’, but I know it’s hard to find a good domain name these days (26econ … ???). Anyway, Yample is “listings gone social”. It’s listings, ie classified ads like Craigslist, only with a “social” aspect where people can create networks of friends, tags, and vote on favourite listings etc. Unfortunately, Yample seems more antisocial than social. They have less than 100 users, most of which seem to have used the site only once.

I might be boring my readers, so just one more, Guruza (I couldn’t steal a copy of their logo easily). It’s yet another “ask an expert” type site, where you can pose a question and experts can answer them (for a fee maybe). This idea has been around for a long time and there are many other such sites, so I don’t know what’s so “Web 2.0″ about it. Anyway, Guruza seems to be suffering from a severe shortage of both questions and experts.

So why have I tortured you with these boring details about unsuccessful websites? I wanted to illustrate the fact that many of these “Web 2.0″ ideas depend on some kind of social or network aspect. All of the three sites above are not bad ideas per se, but need lots of users and usage to become useful resources. The trouble in such cases is how to get off the ground in the first place. When the value of your business depends on how many people use it, people will be reluctant to use it unless they expect others to do so. Even if the site is free to use, it still takes time and effort to register and so on.

In these kind of network markets, probably only a few businesses will survive. There’ll be a few big winners like Facebook and Digg that manage to get off the ground, achieve a critical mass of users, and can then make lots of money. How to maximise your chances of becoming such a winner? First, expectations are critical. If people have pessimistic expectations about the success of your site, they’ll stay away, and their bad expectations will be realised. If you can make people optimistic about the usage of your site, through advertising, promotions or whatever, then you’re more likely to get off the ground.

Second, if possible, leverage off an existing small but well-connected community. Facebook was initially restricted to college students. This was a perfect way to get off the ground, since students already have strong social networks in the real world, and Facebook provided the technology for them to take those networks online. If Facebook had just set up a website and made it open to all, I think it would have been harder to get off the ground.

Third, piggy-back on an existing network if you can. Can you make your service ‘compatible’ with an existing network so that it’s easy for people to switch? This is another thing that Facebook have done right — they make it very easy for you to import your existing networks of contacts from email services like hotmail and gmail. This greatly reduces the pain for users to join Facebook’s network, as they can re-use data that they’ve already plugged in to another network.

In all, starting a network-based business, like a Web 2.0 site that’s based on social networking or user generated content isn’t easy, and I’m not optimistic about the chances of success of many sites in this category.