Direct from Web 2.0

Halloween Treats: Google/JotSpot and Reddit Acquisitions

October 31, 2006 – 11:36 pm by coachwei | Category google, software business model |

On October 31 2006, while we are all enjoying trick and treat on this Halloween day (a beautifully sunny day in Boston), there are some very nice treats in the web 2.0 space too:

1. JotSpot, a wiki-based collaboration software and service company, was acquired by Google on October 31 2006. The terms were not disclosed;
2. Reddit, a Boston-based social bookmarking and ranking website (Reddit has been playing second fiddle to dig.com), was acquired by Condé Nast, owner of Wired and other magazines/website. Again, terms were not disclosed(reported by http://reddit.com/blog/ and Techrunch).

We all remember the $1.5B Google/YouTube acquisition just a few days ago. Don’t all these signify a certain development milestone for web 2.0?

Nexaweb has been a customer of JotSpot since summer 2005. I personally used JotSpot to build quite a few pages for collaboration purpose. Honestly speaking, it did not work out very well: very hard to use and very slow. There is an order of magnitude difference in user experience between JotSpot and desktop-based collaboration tools. But I stuck to it because it does offer what desktop-based collaboration tools do not offer: unbound access. The only wish I had was – JotSpot should be built on top of some enterprise web 2.0 technology such as Apache XAP or Nexaweb. There is a big difference in building a website and an application for knowledge workers whose demand for performance and keyboard access is much higher(If you use JotSpot for more than one hour very day, I bet you will get frustrated). With the Google acquisition, I am definitely hoping that JotSpot will be improved into something more like a real business application instead of being a website on steroids.

I met Reddit.com team in early 2005 at my friend David Beisel’s Boston Web Innovator Group meeting when Steve Huffman and Alexis Ohanian demonstrated reddit.com. I thought it being a nice feature and can probably make some good money by selling into some media companies ( I didn’t believe Reddit can be more successful given that both digg.com and Slashdot.net have been out there already). I was thinking of BostonGlobe and NewYork Times as potential acquieres at the time though Wired magazine is not too far off. Congratulations to Y-Combinator and Reddit team! (BTW: another Y-Combinator company, kiko.com, was auctioned off on e-Bay for about $250K after Google effectively killed their business when Google released Google Calendar).

A few weeks ago, I reported the first IPO of a web 2.0 company. It was not in US but in Japan instead:

The First IPO of a Social Networking Site: Mixi

To my fellow blog readers , Mixi (http://www.mixi.jp) is the MySpace in Japan. Apparently very few people in Japan have heard of or paid attention to MySpace. Their attention is on Mixi, the biggest social networking site in Japan. Launched in February 2004 and membership by invitation only, It has grown to over 5 million registered users by July 2006. Its traffic ranking is 38 globally according to Alexa.com. Mixi’s forecast revenue for fiscal year ending March 2007 is about $40M with a profit of about $14M. It’s revenue is mostly based on advertisement with10%-20% from premium services. Mixi went public on September 14th 2006. Its stock price jumped from about $15 to $32 on the first day with the result of valuing the company at about $1B. -Does the story sound familiar to people in US?

Mixi IPO is a good barometer for how the public market would value a consumer web 2.0 company, especially in Asia. A valuation benchmark that some people took from Mixi IPO is about $200 per member ($1B market cap with about 5M users). This benchmark would value US company Facebook at about $1.5B for its 7.5 million users.

Web 2.0 is certainly getting exciting as we started to see meaningful exits for web 2.0 companies. During web 1.0, the excitement started in the consumer space initially and gradually transitioned into enterprise – shouldn’t we expect similar things to happen in web 2.0?

Another angle to think about is the lack of business model or proven business model in most of these early exits. Being the most successful one, YouTube attracted a huge audience with lots of “eye balls”, but is far from having a solid business model. This is also typical during web 1.0. I think the next phase you will see more companies exit with some solid business models and proven revenue growth, which would lead to the opening of the public market to web 2.0 companies (in US).

While busy going back and forth giving trick and treats to kids, I can’t wait to see the next phase of web 2.0…