…a web 1 and a 2 and a 3, can’t we just skip to 4 already?

I’ve heard so much crap about “web 2.0″ being the next big thing the past couple of years that I just can’t deal with it anymore. Web 2.0 isn’t the next big thing, its the immediately previous thing. Its over, o-v-e-r. In a world where google’s stock price goes from 500 dollars a share in September to 700 dollars a share as I write this, it should be blatantly obvious that this is a fast moving world now. Business moves faster than ever before, the markets move faster, trends move faster, and yes, bubbles move faster. If you’re looking at a trend today and see that it has already entered the collective zeitgeist it probably means that the trend you’re looking at is already well underway, if not past it’s peak by now. What this means is that you need to ignore that train which just left the station and get a ticket on the next one. How do you know when the next train leaves?

Look at the schedule.

Web 1.0 – The “just show up line”. If you wanted to ride this train all you had to do was show up at the station. The whole point of this was to build something online, anything, it didn’t matter as long as you had something. Profit? Who cares. Revenue? Who cares? Budgets? Budgets are for pussies. Just get to the station and cram in, go on, don’t be shy, just cram in there. Well we all know what happened there. Like any train there are a limited number of seats, and people don’t like to sit on each other’s laps. This thing got more overloaded than a commuter train in India. Money flowed from investor’s bank accounts to founder’s wallets (and gas tanks, and mansions, and lavish parties, etc). It was like the bar in those old westerns where everyone would say “put it on my tab”, and you never saw any of those characters pay up at the end. This train left the station years ago, and already derailed because it was overloaded.

Web 2.0 – The “all about the user express”. This is where most people think we’re going now, the train they think is sitting on the platform ready to pull out. They’re wrong, the train already left quite awhile ago. Digg was on it. To ride this train you had to have something called “user generated content” all over your site. Of course the word “user” in that line should be a red flag. It means “internet user” and as we all know, quite a few internet users are actually pre-pubescent 12 year olds who need a significantly higher dosage of Ritalin (or some good old fashioned elephant tranquilizers and a good swift kick to the head). Seriously, go to digg.com, read the comments. Go to YouTube, read the comments. You can’t. They are of such low quality that they are unreadable, and that’s just the comments, can you imagine building a business that depends on those people producing content that is actually usable? Forget it. This train left the station a couple years ago, and no one can communicate with it because the signal to noise ratio is too low, and no one is paying for a lousy signal.

Web 3.0 – The “all about the editor limited”. This is where we actually are now. This train is on the platform and ready to leave the station. This is the stage where people start to try and boost the signal and filter out the noise. To do that you need an editor or a moderator, and a few companies have begun to figure this out. Take Mahalo’s approach for example, they say they want to have an actual human being edit the search results for the top however many sites on the net, or take Brijit where they have a human being helping you decide which articles are worth your time reading. These are both things google can’t do. Try a google search, what do you get? A whole lot of stuff to click through before you find what you really want, that’s what. Wouldn’t it be a whole lot better if you knew that you could find what you wanted easily because some one else had already found it for you and served it up on a nice little platter? Hell yes. Expect tons of people to be chasing this train down the tracks killing themselves trying to jump on as it pulls out. Also expect that, like all the other trains to come and go before it, the seating will be limited, and more expensive, and less people will be able to get on board than the previous train. Unfortunately you can also expect that those people will still not make any money. Yeah, I’m saying it, there isn’t a viable income model here. I’ve heard a lot of talk about people saying that this is where we are going, no, remember, it is where we already are, and those people are just behind schedule.

* Note: Some companies cough google cough will try to make this the “all about the algorithm limited”, totally missing the point of the much needed human factor. They’ll try to automate everything and let the computers decide what is ham and what is spam. And those efforts will be futile. A computer lacks the intuition to make those decisions and instead has to rely on statistics, and as a wise man once said “there are lies, damn lies and statistics”.

Web 4.0 – The “pay the rent special”. Finally we get to the golden age of rail road. Instead of cramming into box cars with folding chairs, or sitting behind a sooty steam engine in an open air car, or sitting in nice car without some of the niceties of travel, people (investors) should finally have learned to expect it all, and to not pony up their cash unless they get it. We’re talking branding (web 1), interaction (web 2), quality signal (web 3) and, oh yes, wait for it, profit. Yeah, web 4 really, truly has to be about finding an income model that works. By the time people have been through that many bubbles with the same group of people involved almost each time they hopefully will have learned that a web site isn’t a business, a company is a business. Until now most of these people have been sinking their money into sites without any real revenue model, on the blind faith of “growth” and “valuations”. Bad move. This stage has to be about building an actual, profitable business that will endure future changes, it can’t be just another stage about building the next coolest website. This train is overdue, and its the one we all should have been on in the first place but were to impatient to wait for.

So that’s the schedule. Each train comes and goes, and each train has fewer and fewer seats on it than the last one, and they each come and go faster than the last one. They’re each also harder to get on than the one before it. My proposal at this point is to ignore that nice, shiny Web 3.0 train getting ready to leave the station and instead get in line at the ticket window and buy a first class seat on the Web 4.0 “pay the rent special”. What that means is that you don’t go out to silicon valley and hit up some VC for millions of dollars and build your super cool web site. Instead you plot and plan, and take some small amount of your own money and prototype different things. Throw a bunch of inexpensive stuff against the wall and see what sticks, with your number one priority being to make money.

You see, if you don’t have a profit you don’t have a business, you either have a hobby or a charity. If you want to run a charity, then by all means, go out there and make the world a better place, but don’t pretend that you’re running a business. Oh, and if you want a hobby, don’t try to get other people to invest money in it for you.

Branding is great, that’s what web 1 was mainly good for, community is also great, that’s what we learned in web 2, in web 3 we’re learning that we don’t need an endless supply of thousands of sources of information, we just need the right amount of quality information. In web 4 we’d better find a way to leverage that to make money. Right now no one has found a reliable formula for generating profits with an online business (businesses that have an offline component are excluded from that statement). The closest anyone has come is the porn industry, but even there it isn’t a sure thing, and there’s a ton of risk. Shockingly when you have millions of porn sites on the net all vying for the same eyeballs, not everyone is making money. Also shockingly, when you’re in a hot button industry some people are getting hung up on all sorts of regulations. That’s a hostile market to start a business in, but right now it has the highest probability to making you money because they have one thing figured out – making money is important, and so they plan their sites around that concept from day one. They all have some revenue model they’re focusing on, even if they pick the wrong one or don’t execute it properly if they’ve picked the right one.

The problem with the mainstream companies is that they seem to take the attitude of “we’ll worry about the money later”, and they build a great site, and when the bills come due they don’t have a revenue stream. These people usually turn to advertising, but (again, shockingly) there aren’t enough ad buyers to match up with all the ad sellers. If you’re depending on advertising to build an empire and join the list of the Forbes 100, you’re going to be disappointed. Advertising might make one lonely webmaster on a well-written, popular blog enough money to live very, very comfortably, but it isn’t going to support an entire company. Can you imagine if Apple gave away their computers and put ads on them to try and pay the bills? People would gladly take the free computer, but Apple wouldn’t make enough money off of those ads to support all of their employees, oh, and a good number of those people who took the free computer would hack it to get rid of the ads, further driving down the prices that ad buyers are willing to pay. No, slapping a banner ad on your page isn’t going to cut it. The only people that can make a boatload of money off of ads are the companies like google that broker the sales and get to dictate the terms. So if you want to make a fortune off of ads, you’d better build an ad platform, not a content site.

Some people will try (and have tried) the walled garden approach where they take their content and charge a membership fee for it. Again (shockingly) there are only so many subscription purchases to go around, and eventually people will say “well I pay for these sites already, I’m not gonna sign up for another one”.

So if advertising won’t work for everyone, and subscriptions won’t work for everyone, what will? This is what I don’t know yet, and I don’t think anyone else does either, but sometime during the web 4.0 bubble someone will figure it out.

So to recap: Web 4.0 will be about the countless attempts to build an actual business. A successful web 4.0 business will have great branding, a loyal community, a high signal to noise ratio, and an actual business model that makes its owners money. Oh, and because of that last point, it will probably be a fairly lean operation with scrupulous spending controls (not quite Scrooge McDuck-like but close). I highly doubt that the most successful of those companies will be started out west in the valley.