Tue, Oct 10, 2006 page12

• Feature: Turning Web 2.0 into a cash cow still a puzzle

  • By Jessie Ho / STAFF REPORTER
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  Internet search giants Google and Yahoo may be the most visited sites for online surfers around the world, but for users in Taiwan and other Chinese-speaking areas, logging on to Wretch (無名小站) has also become part of their daily routine.

  Wretch, founded by six college students in 1999 in the form of a campus bulletin board system (BBS) at National Chiao Tung University, is now the largest photo-sharing and blog service portal in the country.

  According to market rankings from independent industry source Alexa.com, Wretch has the 27th highest traffic in the world, ahead of CNN, AOL, photo-sharing portal Flickr, and Geocities -- the largest online space provider in the US.

  The explosive success of Wretch has attracted Yahoo Inc, which has reportedly offered NT$700 million (US$21.15 million) to acquire Wretch.

  Although the two companies have refused to confirm the deal, Wretch is undeniably riding high on the so-called "Web 2.0" concept, a term that has been discussed and debated fervently after the dotcom bubble burst in the fall of 2001, and is considered representative of the Internet industry's grand comeback.

  Web 2.0, a term coined by Tim O'Reilly, founder of O'Reilly Media, in 2004, refers to a host of second-generation Internet-based services that allow users to share information and promote online interaction.

  Prominent successful examples of Web 2.0 businesses include YouTube, a popular free video sharing Web site founded in February last year that is reportedly being wooed by Google Inc for US$1.6 billion, and Flickr, a popular photo-sharing site that was purchased by Yahoo in March last year.

  Other well-known Web 2.0 firms such as MySpace, De.lic.ous, digg, Facebook and other Web 2.0 startups are mushrooming to vie for the attention of a growing number of Internet addicts.

  The founders of many of these sites merely wanted to share their photos or video clips with their friends in the beginning, but accidentally hit the jackpot and drew a web of followers.

  In Taiwan, in addition to Wretch, iPartment (愛情公寓), Hemidemi and PC Home Online's (網路家庭) blog site have also attracted an increasing number of users willing to share their photos, diaries, video clips, bookmarks and even building virtual homes.

  Although Taiwan may be a rather late entrant, many are eager to jump on the bandwagon. Such eagerness could be seen in the number of people who attended an international conference on Web 2.0 held in Taipei at the end of last month. More than 3,500 Web 2.0 entrepreneur wannabes took notes and asked questions on how to enter the business.

  But will the Web 2.0 hype turn into another Internet bubble?

  "Although the industry is growing, most companies are still looking for a business model that would create profits," said Shine Chen (陳函薇), co-founder of Hemidemi, an online bookmark sharing site.

  Chen's remark echoed the tone and mood at the conference, in which speakers talked about their companies and services but few elaborated on how to grow these companies into cash cows.

  In order to attract users and boost their market presence, the services offered on most Web 2.0 sites are free. These sites earn most of their revenues from ads and value-added services.

  As Internet users are used to enjoying these services for free, collecting subscription fees is not going to happen soon. The sites could be great advertising tools to target specific groups, but users are quick to complain about the growing number of ads.

  While emerging Web 2.0 busi-nesses could be an investment target for venture capitalists, few of these firms have come out with concrete and profitable business models, said Max Fang (方國健), chairman and CEO of Maxima Ventures I Inc (麥實創投).

  Many Web 2.0 sites are capable of accumulating subscribers in a short period of time, but transforming the large volume of visitors into profit remains a puzzle for these companies, Fang said.

  "I think capitalists in Taiwan still don't have a clear picture of the industry," Fang said.

  "People thinking of going into the Web 2.0 business should be more careful before getting sucked into another bubble," he said.
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