Evolution of Web Business

By   /  November 12, 2007  /  No Comments

The World Wide Web evolves; so do businesses on the World Wide Web. But what are the relationships between Web evolution and Web business evolution? And what are the general issues about Web business evolution?  This article addresses these questions.

The World Wide Web evolves; so do businesses on the World Wide Web. But what are the relationships between Web evolution and Web business evolution? And what are the general issues about Web business evolution?  This article addresses these questions.

The vision of Web evolution is important not only for technology researchers but also for business people. As the Web evolves, business on the Web evolves. Think of the business models at the early stages of the Web compared with standard business models as they exist today.  In order to survive, no Web business can simply hold on to one strategy for years when the Web itself evolves rapidly.

Because of this evolution, Web businesses are among the most risky (and often the most profitable) business types in the world. Understanding the Web’s business evolution can help business people know whether their existing business model matches the evolving Web, and if not, how to improve it.

Before approaching, I distinguish Web businesses into two categories—the hardcore Web business and the softcore Web business. Businesses such as Google.com and eBay.com primarily consume online resources (such as page ranks among Web links and Web services) and produce new online resources (such as new theme-focused links and listed online products) to be consumed. Without the World Wide Web, these businesses cannot survive. They are hardcore Web businesses. By contrast, other companies such as Gap.com and southwest.com primarily consume offline resources (such as clothes and airline tickets) but produce new online resources (such as online sale and digital tickets) to be consumed. These companies can survive without the World Wide Web. They are softcore Web businesses. By this distinction, in the narrowed sense only hardcore Web businesses are real Web industries. Softcore Web businesses are offline industries that happen to be online. Unless otherwise mentioned, in the rest of this article we only focus on the hardcore Web businesses. But the principles discussed should also be applicable to softcore Web businesses.

Web Evolution

The prior to the understanding of Web business evolution is to understand Web evolution itself. My discussion is based on my own Web evolution theory, which is the first systematic Web evolution model in the world. This Web evolution model stands on answering two fundamental questions about Web evolution: why the Web evolves and how it evolves.

(1) What is the most fundamental reason that drives normal people contributing to the Web? And my answer: People contribute to the Web so that they can be recognized at present and be remembered ever after. It is not because of money (Web evolution did not take a single pause when the dot-com bubble burst), and nor is it because of entertainment (the majority of people do not live with entertaining). Both money and entertainment are valuable additions to the fundamental reason. Both of them accelerate the progress of Web evolution. But neither is the most fundamental.

So, business strategy managers, what is the most fundamental service of your business? To help people make money, to bring entertainment to people, or to help people be recognized and be remembered?

  • If the answer is the first one, this is a good business but be careful of the next Web bubble.
  • If the answer is the second one, this is again a good business but be careful that your customers may have already started to be bored.
  • If the answer is the third one, this is a great business that satisfies both human instincts and Web evolution. This business can survive bubbles, and it is less likely to be bored.
  • At last, if your answer is the third one, and your business also provides the facilities of the first and the second choices, you must let me know the name of your business so that I never miss the chance to buy your stocks.

(2) How does the Web evolve when people unstoppably contribute to it? My answer is based on the general law of Transformation of Quantity into Quality—any unstopping quantitative accumulation of a progressive event inevitably causes qualitative upgrade at certain point. For example, with unstopping increase of temperature, ice transforms into water and then transforms into steam. All the discovered evolutionary events, from nature’s evolutions to social evolutions, are known to obey this general law. So there is no reason why Web evolution would be an exception. The World Wide Web must also evolve in identifiable, progressive stages. As a matter of fact, the emergence of Web 2.0 has shown the first evidence.

Again, this answer brings challenges to business strategy managers. Which level of Web resources is your company consuming?  Which level of Web resources is your company  producing? We are currently at the stage of Web 2.0.

  • If your company still mainly consumes 1.0-level resources, it is fine, but you may need to consider upgrading your production line because very likely you can improve the efficiency by consuming similar resources but at 2.0-level (which are now widely available).
  • If you company still mainly produces 1.0-level products, it is a dangerous signal, and you must do upgrading of your production line immediately, because your customers will leave for your competitors, whoever has done this upgrade first.
  • Someone may bring out a “brilliant” answer: The focus of our company is to provide Web 3.0 products. I must say sorry to this answer because either this answer is a lie, or this company is unlikely to survive. Before the Web approaches Web 3.0 on a full scale, Web 3.0 companies cannot survive healthily, because few consumers would be able to effectively consume their products (if these products are really 3.0-level quality). It is impossible for Web businesses to survive disregarding the state of the art of the World Wide Web. By contrast, it is, however, more trustworthy to hear that we are now starting to produce resources on 3.0-level quality. But at present, our main focus is still 2.0-level productions.

Web Business Evolution

Web business evolution addresses also two basic questions: how businesses can evolve with the Web and when to upgrade.

(1) What does a Web company need to do to evolve with the Web? The key of the answer is to continuously upgrade the quality of the input resources and output products of its production line according to the progress of Web evolution. This is a simple principle, but few companies execute it well.  

Let’s take a representative scenario to illustrate the problem. Company A sets up a Website to distribute various coupons. This is a good business model because it helps both the coupon providers (prompt sale) and regular customers (save money). The company was started up during the Web 1.0 age, so it built a 1.0-style portal that allowed users posting and sharing coupons. So far so good, and this company was quite successful. Then the age of Web 2.0 came, but the company kept the same production line. What are the problems?

The most severe problem is their products, which are lists of coupons inside various posts on the portal. These products are typically 1.0-quality; information inside is deeply buried, and there is no easy way of digging it. Coupons are timely products and they expire rapidly. Keyword-based search is not only tedious but also inefficient on information filtering when the sources are 1.0-quality. So how can they improve it?

Because of Web 2.0, they can upgrade their portal to be a wiki and encourage users tagging their posts with product names and valid dates. By facilitating Web 2.0 technologies, they can improve the quality of services and engage users within a coupon-sharing community instead of a coupon-search Website. If they do not do this type of upgrade while their competitors do, they are going to lose their market share quickly.

Hardcore Web businesses must be very sensitive to Web evolution to survive. Because of Web evolution, we often see new, smaller companies with fresh new visions that facilitate new milestone technologies to defeat their pre-existed, bigger competitors easily, though these competitors have “more experiences” running business in the particular domain. On the Web, experience is not a deterministic factor. Because of Web evolution, experiences without prompt upgrade are worth little. This fact makes the entire Web business realm full of risk, excitement, and eventually enormous opportunities of being rich overnight. Similarly, however, there are enormous chances of becoming bankrupt overnight.

(2) When do we know an emergency upgrade request is coming? This question is essential because whoever notices the request and does the upgrade before others will certainly lead the run among the competitors. The key is to really understand Web evolution.

New Web technologies are announced almost everyday. If somebody just follows these announcements blindly, he would miss the tipping point of Web evolution. To be alerted, people must have a picture in mind of how the Web evolves and what the key demand of the next generation Web is. Most of the new technologies are either not crucial enough to trigger a stage transition, or they are too ambitious for the long-term future (instead of the immediate next stage). Only with a clear understanding of Web evolution, people might not miss the few but most crucial key technologies that really drive the evolution.

In analogy, if someone does not know at which degree of temperature water transforms into ice, he needs to watch every single decrement of temperature; then very soon he feels tired. As a result, very likely he would miss the first chance to observe the start of transformation. By contrast, if he knows that water transforms into ice at the zero degrees, he can relax beforehand and start to pay attention only when the temperature is close to zero degrees. With knowledge, he is unlikely to miss the first signal of transformation. This is the value of Web evolution theory.  


This article briefly discusses several general issues of Web business evolution. As the World Wide Web evolves, businesses on the World Wide Web also need to evolve. Due to the quickness of Web business evolution, Web industry (especially in its narrowed sense, i.e. hardcore Web businesses) is a highly risky, but also highly profitable, business realm.

As the final assessment, let’s apply this vision of Web business evolution to answer a real-world question: what is the most dangerous killer combination of the current Web companies? My answer: Facebook + Second Life. Facebook stands on helping people be recognized and people can also profit from the Facebook Platform. What Facebook lacks currently is entertainment. By contrast, Second Life is entertaining, but it is not as successful as Facebook as a platform. More importantly, Second Life does not (although it should be able to) focus on helping people be recognized and be remembered. The combination of Facebook and Second Life is, however, a real killer. Everybody should watch—don’t let this merge become REAL unless you are part of it. Cheers!

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