Web 2.0

Tim O’ Reilly’s written an excellent essay on Web 2.0, that I thoroughly enjoyed reading. He makes many interesting points on what constitutes Web 2.0. One of the points he makes is this.

“Data is the next Intel Inside”

Every significant internet application to date has been backed by a specialized database: Google’s web crawl, Yahoo!’s directory (and web crawl), Amazon’s database of products, eBay’s database of products and sellers, MapQuest’s map databases, Napster’s distributed song database. As Hal Varian remarked in a personal conversation last year, “SQL is the new HTML.” Database management is a core competency of Web 2.0 companies, so much so that we have sometimes referred to these applications as “infoware” rather than merely software.

This fact leads to a key question: Who owns the data?

In the internet era, one can already see a number of cases where control over the database has led to market control and outsized financial returns. The monopoly on domain name registry initially granted by government fiat to Network Solutions (later purchased by Verisign) was one of the first great moneymakers of the internet. While we’ve argued that business advantage via controlling software APIs is much more difficult in the age of the internet, control of key data sources is not, especially if those data sources are expensive to create or amenable to increasing returns via network effects.

Look at the copyright notices at the base of every map served by MapQuest, maps.yahoo.com, maps.msn.com, or maps.google.com, and you’ll see the line “Maps copyright NavTeq, TeleAtlas,” or with the new satellite imagery services, “Images copyright Digital Globe.” These companies made substantial investments in their databases (NavTeq alone reportedly invested $750 million to build their database of street addresses and directions. Digital Globe spent $500 million to launch their own satellite to improve on government-supplied imagery.) NavTeq has gone so far as to imitate Intel’s familiar Intel Inside logo: Cars with navigation systems bear the imprint, “NavTeq Onboard.” Data is indeed the Intel Inside of these applications, a sole source component in systems whose software infrastructure is largely open source or otherwise commodified.

The now hotly contested web mapping arena demonstrates how a failure to understand the importance of owning an application’s core data will eventually undercut its competitive position. MapQuest pioneered the web mapping category in 1995, yet when Yahoo!, and then Microsoft, and most recently Google, decided to enter the market, they were easily able to offer a competing application simply by licensing the same data. Contrast, however, the position of Amazon.com. Like competitors such as Barnesandnoble.com, its original database came from ISBN registry provider R.R. Bowker. But unlike MapQuest, Amazon relentlessly enhanced the data, adding publisher-supplied data such as cover images, table of contents, index, and sample material. Even more importantly, they harnessed their users to annotate the data, such that after ten years, Amazon, not Bowker, is the primary source for bibliographic data on books, a reference source for scholars and librarians as well as consumers. Amazon also introduced their own proprietary identifier, the ASIN, which corresponds to the ISBN where one is present, and creates an equivalent namespace for products without one. Effectively, Amazon “embraced and extended” their data suppliers.

Imagine if MapQuest had done the same thing, harnessing their users to annotate maps and directions, adding layers of value. It would have been much more difficult for competitors to enter the market just by licensing the base data.

The recent introduction of Google Maps provides a living laboratory for the competition between application vendors and their data suppliers. Google’s lightweight programming model has led to the creation of numerous value-added services in the form of mashups that link Google Maps with other internet-accessible data sources. Paul Rademacher’s housingmaps.com, which combines Google Maps with Craigslist apartment rental and home purchase data to create an interactive housing search tool, is the pre-eminent example of such a mashup.

At present, these mashups are mostly innovative experiments, done by hackers. But entrepreneurial activity follows close behind. And already, one can see that for at least one class of developer, Google has taken the role of data source away from Navteq and inserted themselves as a favored intermediary. We expect to see battles between data suppliers and application vendors in the next few years, as both realize just how important certain classes of data will become as building blocks for Web 2.0 applications. The race is on to own certain classes of core data: location, identity, calendaring of public events, product identifiers and namespaces. In many cases, where there is significant cost to create the data, there may be an opportunity for an Intel Inside style play, with a single source for the data. In others, the winner will be the company that first reaches critical mass via user aggregation, and turns that aggregated data into a system service.

For example, in the area of identity, PayPal, Amazon’s 1-click, and the millions of users of communications systems, may all be legitimate contenders to build a network-wide identity database….While the jury’s still out on the success of any particular startup or approach, it’s clear that standards and solutions in these areas, effectively turning certain classes of data into reliable subsystems of the “internet operating system”, will enable the next generation of applications.

A further point must be noted with regard to data, and that is user concerns about privacy and their rights to their own data. In many of the early web applications, copyright is only loosely enforced. For example, Amazon lays claim to any reviews submitted to the site, but in the absence of enforcement, people may repost the same review elsewhere. However, as companies begin to realize that control over data may be their chief source of competitive advantage, we may see heightened attempts at control.

Much as the rise of proprietary software led to the Free Software movement, we expect the rise of proprietary databases to result in a Free Data movement within the next decade. One can see early signs of this countervailing trend in open data projects such as Wikipedia, the Creative Commons, and in software projects like Greasemonkey, which allow users to take control of how data is displayed on their computer.

Housingmaps.com is cool. The chap mashes up the Craigslist API and GoogleMaps API and hey presto, you can lookup house listings through a GoogleMaps interface. Simple as that. Hmm…not really. 🙂

Then there’s Tagzania which mashes up GoogleMaps and Del.icio.us. A good list of such API mashups is here

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Posted on October 6, 2005, in Uncategorized. Bookmark the permalink. 4 Comments.

  1. well put, as usual! Apart from the focus on data as the driver, another key driver for Web 2.0 will be the concept of opening up APIs as web services. Application Integration is finally becoming a reality.

    See this -> http://www.livejournal.com/users/sriramb/42168.html and let me know if you’re interested. Would love to have you there.

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