The Future of Web Applications ( FOWA ) is - More PR !!

Day 2 am at FOWA Oct 07, and Hacker and Painter Paul Graham led the plenary session this a.m, essentially his thesis is that as costs to start a startup tumble, so the number of startups will rise rapidly, and Y-Combinators' role is thus to facilitate the mass production of startups*. I got interested in the implications of this, ie assume that for arguments sake there is a 10-fold fall in the average cost of a startup, and that in any one evolutionary geeky niche 10x more startups then get going, the darwinian nature of the game will make for a life that is red in tooth and balance sheet and life is likely to be brutish and short.

Here's a scenario - imagine any niche - the available total value created won't really go up based on the number of entrants, so the 10x more startups will be fighting for it with much thinner pickings per head. If it is even vaguely evolutionary in nature (I can't believe they can all capture sufficient market share in any globally accessible businesses) then a power law (take Zipf for eg, or Pareto) will emerge - ie only a few will succeed. Given that the startup DNA is roughly the same technically, the differentiator will be the Manufactured Lucky Break - aka the buzz, marketing etc etc - and thus startups will be even more vehicles that take Limited Partner money and give it to PR companies than the dotcoms were.

Moving smoothly on to the next talk, Edwin Aoke of AOL noted that the Webs apps of the future are going to be ubiquitously everywhere - games machines, PC's, mobiles, PDAs, PC's - even more competition in other words. Not just that, but he predicts that there will be:

- New industry consortia for low cost consumer devices
- Major push for standards for content distribution (HTML, Java etc)
- Brand new mobile computing platforms with a standard OS / Developer platform

Apart from the joyful possibility of an end-run around the mobile operators - or at least pressuring them to change their ways - this is essentially squeezing surplus out the value chain - some will no doubt go to some of the myriads of startups, but some will just go away (or more likely be sucked into marketing those startups). The level of competition in Paul's scenario will make damn sure there is no surplus for the startups.

On then to Rashmi Sinha's views on her startup, Slideshare (a Flickr type webservice for Powerpoint) and how to build a successful social business. In essence she argued very strongly for early launch, iteration, agile approaches etc etc. Rashmi's presentation has been blogged in detail by Stephanie Booth over here, and Suw Charman over here - as you can see she got quite a strong pushback as people were sceptical about this level of "Web 2.0 faith" being applicable for Office 2.0 applications.

I would make the following observation about this (that I made in the Q&A), and in fact many other of the "Web 2.0" perpetual beta-ing, open access businesses. Essentially they must by definition predominantly exist in the quadrant of the 2x2 matrix called "non critical B2C apps". Sadly, no-one is going to let an unstable app near a critical path value chain (unless it offers stupendous reward for the risk), and most businesses will not let open (as in unsecure), unstable, unsupported apps anywhere near anything at all if they can help it!

Suw Charman in fact made these exact points in her LoLCat but deadly serious presentation - mark her words well:

- Make sure the app is ready for prime time
- Perpetual betas don't fly in a business environment
- People in business don't use software because its cool - they use it to get stuff done
- The stuff must integrate to existing system stacks - this means you fit to LDAP/Active Directory, not them to Open ID
- Businesses are usually late adopters - the risks of early adoption usually far outweigh the benefits

Yes, business will change (It has to in the long term - those same forces are effecting it), but at a slower pace than most small startups will take to run out of seed money.

The implication is in the short to medium term nearly all those startups are going to be fighting for the scraps in the "B2C non critical quadrant", or will have to change their operating assumptions markedly - but of course this changes the economics and culture. The premium on publicity, the leg up on TechCrunch from the morass of same-tech me-too's, will thus be immense.

Postscript - was going to put this in a later post, but Dick Costolo's end of day talk - launch late to iterate often - also falls into this storyline. In essence Dick was showing that the "traditional" disciplines of startup fiduciary responsibility are going by the wayside, it was increasingly about getting up, up and away and to perpetually beta the business plan as well as the tech.

Dick also noted that despite the low cost of startup, the cost of scale was still significant (and I would argue will be even more so) and thus getting early stage traction will be even more critical. His argument was more along the lines of get good people and motivate them, get a service out - but not too early - get users, get enough funding and get going.....in effect a "how to build great mousetraps for the world to flock to" approach. Now, Don has been very successful....

....but just in case, take your PR person to lunch today

* postscript - the mass production of startups zeitgeist is in the air...here's more

post postscript - Fred Wilson (A 'nother VC) catches this meme too...