Time for Web 2.0 to wake up and smell the money

Web 2.0 companies have a lot to learn from open source in the business context--like how to actually deliver a return to investors.

SAN FRANCISCO--Tom Foremski of Silicon Valley Watcher suggests that "you aren't are missing anything if you couldn't make it" to Web 2.0 Expo. That may be a bit strong, but one thing seemed to be almost entirely missing from the show: money.

Yes, there were plenty of sponsors spending money on the conference. There just wasn't much emphasis in the conference program itself on actually making Web 2.0 profitable for more than just Google, despite an entire track dedicated to Web 2.0 business models.

The one session, other than mine, that focused on the topic was somewhat apologetic about even having to raise the issue: "Why Sales Shouldn't Be a Dirty Word in Web 2.0."

Sales? A dirty word? How do these companies expect to exist long enough to be acquired? And while the good old days saw Web 2.0 companies bought based on their page views alone, the reality is that not many Web companies are going to be able to acquire money pits forever. Only so many companies can afford to acquire a YouTube and have it bleed mountains of cash.

Ironically, the open-source world, which has been criticized in the past for not making its advocates enough money, is now firmly focused on minting money, and it's doing a pretty impressive job of it. Red Hat, the biggest open-source company, notched more than $659 million in revenue in its last fiscal year, but Red Hat is no longer alone in making money with open source.

My own company, Alfresco, announced 103 percent year-over-year revenue growth (on a very significant base). Open-source ad server company OpenX delivered 400 percent growth in its ad-serving business. Pentaho and others have also announced significant growth, even as the economy contracts.

Web 2.0 has a lot to learn from open source. There are plenty of principles common to both (e.g., users add value, focus on adoption before focusing on sales), but there's one principle that Web 2.0 companies need to adopt immediately: users are nice, but customers are critical.

Disclosure: I am an Alfresco employee.

Follow me on Twitter @mjasay.

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