Web 2.0: Finding a business model that pays

April 24, 2008: 11:05 AM ET

By Michael Copeland

It's not your 15-year-old daughter's Internet anymore. On the first full day of the Web 2.0 Expo, that more than anything seemed to be the message from the conference room floor.

Tech stalwarts like Oracle (ORCL), IBM (IBM) and Microsoft (MSFT) were showing off technologies that bring elements of the consumer Internet to the workplace. Startups that last year might have been flogging a consumer video service or photo sharing site, instead were demonstrating web-based technologies to develop better Flash sites for business, a cheaper CRM software or an easier way to collaborate on projects. Dubbed Enterprise 2.0, the movement has been gathering steam for some time, but at the Web 2.0 Expo, business seems to have at last eclipsed the consumer Web.

The usual laptop-covered-in-stickers crowd was present as well, but for the most part this is not a gathering of people breathless over the latest Facebook app or keen on launching a widget that makes it easy to find where your favorite band is playing.

Part of that is by design: The companies that can afford to set up in the Expo hall are companies with money, like IBM, Microsoft, Adobe (ADBE) and others. But that itself is a sign of where Web 2.0 is heading. Last year, consumer Web companies had cash to burn. This year, many of the darlings of the social Web, startups that nailed funding at lofty valuations over the last 12 to 18 months, are holding onto what cash they have in anticipation of tougher times ahead.

It has been harder to monetize the social Web than many have thought, and buyers have become harder to come by, especially at the prices many Web2 companies thought they could command. As a result, companies are switching business models like spent horses. "People are realizing that advertising is not good for everything, that it's not going to make them the next Google," says Raju Vegesna, an engineer with online applications developer Zoho. "They are starting to get worried."

Easy for Vegesna to say - Zoho is going directly after the business world, and makes money from subscriptions for its Web-based software. There is no question, though that smart entrepreneurs are starting to see things the way the Zoho team does, and creating applications and services that cater to business. That's the good news for the corporate world. It's about to get a slew of new tools that are informed by the best of the consumer world, but that pack the scaleability, security and customization that business users require. We'll highlight the best over the next two days. It's enough to make a 15-year-old girl jealous.

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