One of the things I'm doing this week is preparing for a presentation at Web Builder 2.0 on how to monetize mashups in Las Vegas next week.  Consequently, I've been pulling together notes, talking to mashup creators, and studying real-world examples of how companies are applying innovative ways of generating revenue with Web 2.0 applications and open APIs.  Though there are all sorts of interesting emerging stories, such as the new Second Life millionaire, product developers are increasingly trying to explore the options beyond the obvious: namely big value acquisitions ala YouTube or the often fickle, if mostly workable, online advertising route.   But the biggest question that comes up is that if you let your users generate most of your content and then expose it all up via an API, how can a profitable business be made from this?

This has been the question from the outset, and though you can build enormously successful sites in terms of numbers of users and amounts of content using Web 2.0 techniques, the best means of monetizing this remain a larger unproven endeavor.  I wrote a while back on the struggle to monetize Web 2.0 where I explored in detail the strategic and tactical methods for making next generation Web sites financially viable, even successful.

If you refer to my original article on monetizing Web 2.0, I identified three tactical means for generating revenue (advertising, subscriptions, and commissions) and a series of strategies that can support them.  While it's usually fairly clear how the direct revenue models work, it's usually less clear to people how the indirect strategies can directly influence the opportunities.

Strategies for Making the Most from Web 2.0 

• There are direct (the 3 items above) and numerous indirect ways to monetize Web 2.0 that often go unappreciated
• Some of the indirect ways which lead to revenue growth, user growth, and increased resistance to competition -- which in turn lead to increased subscriptions, advertising, and commission revenue -- are:
• Strategic Acquisition: Identifying and acquiring Web 2.0 companies on the exponential growth curve before the rest of the market realizes what it's worth (early exploitation of someone else's network effects.)
• Maintaining control of hard to recreate data sources.  This is basically turning walled gardens into fenced gardens:  Let users access everything, but not let them keep it, such as Google providing access to their search index only over the Web.
• Building Attention Trust - By being patently fair with customer data and leveraging user's loyalty, you can get them to share more information about themselves that in turns leads to much better products and services tailored to them.
• Turning Applications into Platforms: One single use of an application is simply a waste of software.  Turn applications into platforms and get 5, 50, or 5,000 additional uses (Amazon has over 50,000 users of its line of business APIs) for example.  Online platforms are actually very easy to monetize but having compelling content or services first is a prerequisite.
  
• Fully Automated Online Customer Self-Service: Let users get what they want, when they want it, without help.  Seems easy but almost all companies have people in the loop to manage the edge-cases.  Unfortunately, edge cases represent the The Long Tail of customer service.  This is hard but in the end provides goods and services with much tighter feedback loops.  And it's also a mandatory prerequisite for cost effectively serving mass micromarkets.  In other words, you can't directly monetize The Long Tail without this.

Lying directly in the primary tenets of Web 2.0 however, are a series of two-edged issues from a revenue perspective.  Though the concepts and ideas are powerful when applied appropriately, they can also pose significant short-term and long-term challenges.  Below are the basic principles of Web 2.0 along with the positive and negative revenue implications for most companies on the Web today, even ones that aren't fully embracing it yet.

 Revenue Implications for Web 2.0 Principles (not meant to be exhaustive)

• Principle 1: Web as Platform
• Upside:  Revenue scalability (1 billion users on the Web), rapid growth potential and reach through exploitation of network effects
• Downside: Competition is only a URL away, often requiring significant investment in differentiation
  
• Principle 2: Software Above a Single Device
• Upside: More opportunities to deliver products and services to users in more situations
  
• Downside: Upfront costs, more infrastructure, more development/testing/support (costs) to deliver products across multiple devices
  
• Principle 3: Data is the Next "Intel Inside"
• Upside: Customer loyalty and even lock-in
• Downside:  Lack of competitive pressure leading to complacency, long-term potential antitrust issues
  
• Principle 4: Lightweight Programming & Business Models
• Upside: Dramatically reduced production costs, easier integration with partners, suppliers, faster product cycles or more features
• Downside: Unexpected scalability demands, unpredictable capacity, potential security issues, lack of control
  
• Principle 5: Rich User Experiences
• Upside: More productive and satisfied users, competitive advantage
  
• Downside: Higher cost of development, potentially lower new user discoverability and adoption
  
• Principle 6: Harnessing Collective Intelligence
• Upside: Much lower costs of production, higher rate of innovation, dramatically larger overall content output
• Downside: Lower level of direct control, governance issues (increased dependence on user base), content management issues, and legal exposure over IP
  
• Principle 7: Leveraging The Long Tail
• Upside: Cost-effectively reach thousands of small, previously unprofitable market segments resulting in overall customer growth
  
• Downside: Upfront investment costs can be very significant, managing costs of customer service long-term

While a great many startups are not generating revenue in huge quantities yet, the companies that have been diligently exploiting open APIs such as Amazon and Salesforce are in fact generating significant revenue and second order effects from opening up their platforms and being careful not to lose control.  This is actually a large discussion, and as large Web 2.0 sites continue to emerge, we'll continue to keep track of what the successful patterns and practices are.

What other implications are there by putting users in control of content generation and opening everything up? 

The end of 2006 is nigh upon us and this blogger for one had a terrific time covering Web 2.0 for those of you that are interested in following the topic.  Love or hate buzzwords, there's little question that subjects related to Web 2.0, from its convergence with SOA , to the rise of rich user experiences including Ajax, to a flood of exciting new largely user-powered online applications both inside and outside the firewall and much more, were all very popular with our readers and covered here in as much detail as possible.

2006 was filled with significant events for us with regards to the next generation of the Web.  During the year we participated in Microsoft's SPARK event, helped organize The New New Internet conference with great appearances by Michael Arrington and Andrew McAfee, launched AjaxWorld magazine in its print edition as editor-in-chief , and delivered numerous talks around the country on RIAs and Web 2.0 design patterns and business models for conferences including Interop, AjaxWorld, Office 2.0, and many others. 

A quick look at the trends tell us that 2007 is shaping up to be even bigger than last year as an even larger, more general audience continues to develop interest in the possibilities of applying Web 2.0 patterns and best practices deeply into the core of their products and services both existing and new.  Harnessing collective intelligence via network effects and feedback loops became generally understood as the dominant design element of the Web 2.0 by most accounts.  This was palpably reinforced by new and old companies alike including YouTube and MySpace gaining market dominance over industry leaders in just a score of months while Google and Amazon continued to use their years old network effect advantage to maintain leadership in their sectors.

But much of this entire story was driven directly by the increasing scale, size, speed and interconnectedness of the Web, making it easier than ever to reach out to tens of millions of potential users practically overnight via the 1 billion+ users that reside there in the biggest single marketplace in history.  Continued performance improvements in a number of metrics has also made much of the Ajax and RIA phenomenon possible.  This includes not just the speed of the Internet itself but the speed of the computers that the average user has as well.  Thus, the dramatic performance improvements in the overall physics of the computing experience will just continue to push the envelope of what's possible on the Web in an essentially continuous fashion.  Hopefully early adopters of the Internet such as the United States will continue investment in Internet infrastructure improvements and not let this trend languish.

While I'll save the predictions for where all this will lead in 2007 for another upcoming post, it seems clear that users, businesses, and other organizations that deeply embrace the fundamental nature of the Web as a communications-oriented platform without any single owner except all of us, will be the only ones able to fully exploit the possibilities of online applications.  Because until now actionable ideas and techniques that directly explain what the most successful ways of building online software weren't well understood or easily accessible to most.  The continually evolving model of what works and what doesn't in online applications design is currently labelled Web 2.0.  And our tools and techniques finally started to adapt to these models this year and the rise of simplicity and optimization for Web-oriented systems as exemplified by the new applications stacks like Ruby on Rails, the growing adoption of lightweight protocols like RSS, ATOM, JSON, and REST, and network effect-powered business models including building hard-to-recreate sources of data and fully leveraging The Long Tail will become the norm.  For now, the early adopters will be able to use techniques potentially heads and shoulders above their competition.  What this will mean for those that fail to embrace this is something I'll cover in a my 2007 predictions post.

With a hat tip to Rod Boothby's idea of the same, here is a summary of our most popular material on Web 2.0 this year as judged by our readers.  These are the top read posts of 2006 on this blog site with over 10,000 page views.  I do hope you enjoy:

Top Web 2.0 Blog Entries for 2006 

11. Thinking Beyond Web 2.0: Social Computing and the Internet Singularity (10,131 page views)

10. All We Got Was Web 1.0, When Tim Berners-Lee Actually Gave Us Web 2.0 (10,203 page views)

9. Notes on Making Good Social Software (10,485 page views)

8. The Ajax Spectrum (10,544 page views)

7. Why Ajax Is So Disruptive (11,320 page views)

6. Seven Things Every Software Project Needs to Know About Ajax (11,346 page views)

5. Web 2.0 Predictions for 2006 (16,531 page views)

4. Ten Ways To Take Advantage of Web 2.0 (21,666 page views)

3. Ruby on Rails 1.1: Web 2.0 on Rocket Fuel (29,204 page views)

2. The Most Promising Web 2.0 Software of 2006 (44,125 page views)

1. The State of Web 2.0 (50,147 page views) 

Stay tuned for Web 2.0 Predictions for 2007 and The Best Web 2.0 Software of 2006, coming next week. 

Looking back over 2006 it's clear that we've experienced one of the most remarkable growth surges in Web application history.  Literally hundreds of Web sites and applications were launched this year and brought to our attention via the popular review sites like Michael Arrington's TechCrunch, Pete Cashmore's Mashable , and Emily Chang's eHub.  And our very popular list of last year's Best Web 2.0 Software of 2005 was ultimately read by hundreds of thousands of readers in over a dozen languages.  This makes it clear that not only is the ongoing supply of capable, online software flowing freely but that there is high-demand from the general Web populace as well. 

The overall trend: We have begun moving all our software, data, and even our social activities onto the Web en masse and the demand for high-quality online sites and applications that support this shift in primary focus from the PC to the Internet is there in vast numbers (there are now 1 billion users on the Web today).  The net result is that 2006 brought us some of the best online applications ever created and you can see the results for yourself below.

Last year's Web 2.0 software list we had a variety of categories ranging from Image Storing and Sharing to Web-Based Word Processing.  Since then, the scope of Web applications has broadened considerably as has the definition of Web 2.0 itself, which has formalized and settled a bit as well.  This reflects the real diversity in online applications from every kind of social media site to online productivity apps.  Thus this year's categories have been consolidated and new categories added.  Most notably I've added a Office 2.0 Suite category to cover the growing lists of ensemble software sites such as Zoho's Office Suite that are increasingly treading squarely on the integrated feature set that traditional productivity suites like Microsoft Office and Open Office.   We've also added an Honorable Mentions section to reflect the fact that some of the new Web applications are so innovative that they nearly defy description but clearly deserve to be highlighted.

So I hope you enjoy touring the applications on this list.  Finally, this list is entirely subjective and any errors or omissions are mine alone.  You may not agree with some of the software I've listed but this isn't a one-way web; I definitely encourage you to list anything you feel we missed or got wrong below in the comments (and last year we received hundreds of submissions via comments).  Please use the wiki link syntax ([url text_desc]) in the comments to make sure you embed plenty of good links.

Note: The site did not have to launch in 2006 to make this list, it just had to provide the best offering in a given category during the calendar year.

The Best Web 2.0 Software of 2006

Category: Social Network

Best Offering: MySpace

Description: The pre-eminent granddaddy of all social networking sites, MySpace needs no introduction.  And while it's taken hit in numerous quarters for the quality of its users and content, for its lack of attractiveness, and even garnered a reputation for being a somewhat unsafe place to socialize online, it's still far and away the leader in terms of users.  Easy to use and very customizable, MySpace offers some of the best user experience as well.   And users apparently agree.  If you take a look at the (unscientific and off-the-cuff) Alexa traffic chart of the other top social networking sites, you'll see that MySpace remains an absolute juggernaut.  And it's because of this very fact MySpace remains the place where the most users are and there are now those fully taking advantage of that fact.  A key trend: Businesses are increasingly opening up storefronts on MySpace. Why?  It's easy to do and a great draw for customers in a younger demographic.  Hollywood has taken to promoting its films with MySpace profiles and countless companies are using it has a marketing and advertising platform such as HBO with their Entourage car giveaway earlier this year.  And while commercialism of just about any new media is inevitable, it reaffirms that MySpace remains the king.  That's not to say that plenty of other good social networking sites don't exist.  But they simply can't come close to matching in terms of scale, which means MySpace remains the most significant online community today.

Runners Up:  

Category:  Start Pages

Best Offering: Netvibes

Description:  Netvibes won this category in last year's list and also gets the #1 spot this year.  The start page pheneomenon has been an interesting online Web app trend that got underway in 2005 with the release of numerous different products in this space.  In short, start pages provide a roaming desktop that can host all of a user's most common Web information such as news, weather, e-mail, RSS feeds, and more, all in a single user-controlled Web page.  My overview of these earlier this year on ZDNet was Slashdotted, just another indicator of the apparent popularity of these personalized Web desktops, usually powered by Ajax but often by Flash as well.  During 2006 however, not many of these products saw serious growth and their visitor traffic growth has been slow.  Except for Netvibes that is, which has been growing month by month by offering things like an extremely polished look and feel, localization in many different languages, and open API.  The last piece is critical for allowing others to add to and build upon the Netvibes platform (turning applications into platforms being a key Web 2.0 technique) and result of this shows clearly in the Netvibes product.  The Netvibes developer ecosystem is vibrant and growing with over 500 different add-on modules from Comic of the Day to a module that will quickly turn any document into a PDF file.  While Live.com has much more overall traffic than Netvibes, it's likely due to Microsoft's own mega-ecosystem since personalization has moved to the back burner of the front page of Live.com and has been upstaged by Microsoft's search engine.  Click here for a more complete list of existing start pages.

Runners Up:   

Category: Social Bookmarking

Best Offering: StumbleUpon

Description: StumbleUpon has unseated last year's winner, del.icio.us.  Search engines like Google can help you find the material you're looking for using keywords, but social bookmarking sites can let you directly harness the collective intelligence of other users on the Web the directly share personal interests with you.  Theoretically, this can help you find what you're looking for better, but what it really ends up doing is helping you find things that you never knew existing, but wished you did.  StumbeUpon installs a toolbar in your browser and lets you collaborative rate content.  This improves the recommendations for other users and behavior matching is used to find users like you and pages that you haven't seen before, on-demand.  One indicator I use for the popularity of a social bookmarking site is how much inbound traffic I get from it, and I've seen a clear switch during the year from del.icio.us bookmarks to StumbleUpon referrers.  StumbleUpon reports that it has over 1.7 million registered users and growing.  Bottom Line: Del.icio.us is still my favorite bookmarking service, but for true content discovery, StumbleUpon now makes it much easier to find new content than del.icio.us does.  StumbleUpon is a winner by a nose for taking content discovery to the next step.

Runners Up:  

 Category: Peer Production News

Best Offering: Netscape.com

Description: In a decision that likely won't be agreed with by the users of last year's winner in this category, Netscape has been selected as the best all around peer production news site.  Though Digg is more popular in terms of traffic than the next three most popular peer production news sites in this category combined (though only barely), Digg remains primarily a technology news site, with actual general purpose news seeping in occasionally around the edges.  In contrast, Netscape consistently delivers news on its front page that is genuinely newsworthy and geared towards a broad audience, combined with a mature community that frequently engages in genuine civil discourse in the comments.  This highlights the demographics of the site of course since peer production sites have the news stories delivered by their users and the top stories selected by other users.  Thus Netscape currently provides the best overall mix of news content and community and wins this year's peer production news category.

Runners Up:  

Category:  Social Media Sharing

Best Offering: YouTube

Description:  The rise of YouTube this year has been one of the most phenomenal rises of an online property in Internet history.  With up to 100 million viewers in a given day and averaging 65,000 videos uploaded per day, YouTube has successfully leveraged network effects for growth and viral adoption with a success that few have ever equaled.  Last year image sharing was the hot social media sharing play, but 2006 is clearly the year of video.  You can find a video on just about anything you can think of on YouTube and its radical ease of use, innovative tagging infrastrcture, and drop-dead easy to host YouTube badge (with the Javascript snippet it for it right next to each and every video) sets the standard for the rest of the industry.  The selection for this category was easy and YouTube was the clear choice. 

Runners Up:    

Category: Online Storage

Best Offering: Amazon's S3 with JungleDisk

  with 

Description: I did a round-up earlier this year of most of the leading online storage products (and there are many), but the one that I have ended up using the most by far and ultimately selecting as my permanent online storage solution is Amazon's terrific S3 storage Web services API combined with Jungle Disk for Windows Explorer integration.  S3 stands for Simple Storage Service and that's exactly what it is.  There's no limit to how much data you can store with S3, how much data you can transfer to and from your home or work PC from S3, and S3 is very fast, reliable, secure, and cheap.  I now host hundreds of gigabytes of data in my S3 account for a few dollars a month and I can access it from anywhere I travel without having to worry about backups or otherwise maintaining my data to make sure it's not lost (Amazon does it all for you).  While there are other good online storage solutions, nothing comes close to the freedom and security of using S3 since Amazon is one of the leading Internet companies and will likely be around for a long time.

Runners Up:   

Category: Office 2.0 Suite

Best Offering: Zoho Office Suite

Description: The Office 2.0 phenomenon become a true reality this year as just about any kind of business application could be found in a purely browser version.  Zoho has been diligently releasing product and product this year and now has entire online productivity suite that has a word processor, spreadsheet, wiki, project management, presentation, contact management, and much more.  While you can find the individual pieces from various other Web apps, Zoho provides a nice integrated, one-stop package that is very reminiscent of Microsoft Office. Microsoft and Google have been slow to get fully into this space and it may very well end up that smaller players establish dominance in an area that most expected the Big Two would dominate in this space.  And an important space it is too: Online apps ultimately will be where our software and data is for most users, and establishing leadership in this product space with the Web as the only major new software paltform on the horizon is a major open opportunity.

Note: Last year I broke the individual categories of Office 2.0 out, and with the overall quality of such tools now being fairly consistent, I'm now highlighting the suite aspect as an important trend trend in 2006. 

Runners Up:    

Category: Honorable Mentions

Blog Filters:  Like last year, Gabe Rivera's brilliant meme engine for the blogosphere still reigns supreme as far as taking the pulse of the conversation on the Web right now.  And its permalinking structure with history support is just about the best example of Web design and content addressibility that I've seen.  If you aren't using TechMeme daily to see what's going on, you don't know what you're missing.

Social Music: Online music doesn't get easier than Pandora, which has now become my favorite way to discover new music.  Just a single Web page written in OpenLaszo, Pandora creates a custom radio station for every visitor in seconds based on the names of artists or songs you know, and then continously plays new music related to what you suggested.  Now with social features, Pandora serves The Long Tail of music demand very nicely and is very easy to use and it shows: Pandora reportedly has over 2 million users.

Professional Social Network: 2006 was the year that having a LinkedIn profile was almost mandatory if you were in business, particularly now that all profiles have a URL.  Almost everyone has received a LinkedIn invitation at some time or other, and LinkedIn really made it on the radar this year.  While lacking robust social networking features such as blogging, LinkedIn's core functionality of maintaining a network of contacts that is automatically updated as people move around from job to job is just about the best out there.

Consumer Generated Advertising: The Chevy Apprentice campaign was just about the best example of a true Web 2.0 phenomenon as GM opened up the doors in early 2006 of a competition for anyone to create online videos about the Chevy Tahoe SUV, tends of thousands which were ultimately created and submitted.  GM even left the negative ads up and sparked a real conversation about how much control of their marketing message should companies hand over to their customers.  Since the original competition site is no longer online, click on the picture above or here to see the YouTube hosted copies of the ads that were created, some of which are very creative and are just as often negative as they are positive.

Online File Conversion: There is a growing list of online file conversion sites, but Zamzar has an impressive list of support file formats for documents (including MS Office docs), images, audio, and video including WMV, AVI, and many more.  More importantly, the site is incredibly easy to use and very handy when you need to do an urgent file conversion while on the road or want to avoid the hassle of the numerous freeware downloads.

Web Application Stack:  Ruby on Rails took a front seat this year as it become one of the most popular new ways to develop online database-driven software, Web 2.0-style (collective intelligence apps) or otherwise.  I wrote up a more detailed story about Ruby on Rails for ZDNet that's worth reading if you want more details but the big take away is that Ruby on Rails is optimized for ease-of-development, extremely rapid results with little effort (10-20 times more productive that previous platforms like J2EE and .NET).  I suspect that in 2007 the majority of new Web apps will be developed in Rails or PHP, they're just that much better.

Mashup Tool:  While next year will see the release of a flood of end-user mashup tools, a few good ones hit this year, but DataMashups.com gets the credit for getting there first and with a surprisingly robust product.  I recently wrote up the state of mashups for 2006 as well as a round-up of mashup tools , and while it's still an product space that is in its very early stages, the promise is impressive for users to soon be able to assemble the software solutions they need onthe fly.  Expect the mashup tool market to start growing rapidly in 2007.

And that's it for now.  And since this is a Web 2.0 blog, please do contribute your own mentions and nominations below and I'll do an update a few times with some of the best suggestions so we can make this the best Web software list of 2006.

While the window on using the "2.0" suffix is probably closing, I thought it would be worthwhile to explore an especially significant trend in 2006 that will likely see much more widespread uptake in 2007.  Specifically, I'm talking about building highly competitive online products by turning over non-essential control to users directly via the Web.  For now, I'm calling this online business trend "Product Development 2.0", a concept that embodies the use of Web 2.0 concepts such as harnessing collective intelligence, users as co-creators, and turning applications into platforms, three of the most powerful techniques in the Web 2.0 arsenal.

What is Product Development 2.0 exactly?  It's an informal term I'm applying to something that online startups and traditional businesses both are increasingly doing: leveraging of mass user contributions, providing open architectures for others to build on as they like, and even handing control over key product decisions directly to users.  The reasoning behind doing this is simple:  Satisfied customers have always been essential to having the most successful business, both online and offline.  But how best can you ensure that they get exactly what they want from you, as customized and quickly as possible?  This is where the scale, new tools, and business models of Web 2.0 have stepped in, giving us the potential to provide our customers with better, rich products, much more quickly, and with more of what they want.  Taken as a whole, it's increasingly clear that there are new business models afoot that are just now being well understood.

Given that any business typically is vastly outnumbered by its customers and potential customers, and that putting a bureaucratic, centralized product development team into the critical path of product creation and ongoing maintenance highlights how little we can actually serve them, especially in an individualized way. And with everyone online, it's increasingly obvious where the biggest source of talent, engagement, innovation, agility, and worker bandwidth really lies: with your customers.  Using the techniques and technologies that have emerged in just the last few years, you can now finally give them the tools and motivation to tweak, tune, refine, and contribute to your products and services.  And increasingly, they'll probably do it.  YouTube is still currently one of the best examples of user co-development of a world-class product in its pure form (65,000+ videos uploaded by users per day), but sites like eBay, Slashdot, and many others have been leveraging their users in product development for a long time now.  And as it turns out, Product Development 2.0 is not a small topic and starts off at collecting explicit user contributions, leveraging the Database of Intentions, and putting in automated real-time feedback loops to identify the best or most popular new content or capabilities for other users that come along later.

It's important to note that it's a fundamental shift for a business to turn over a large part of its product development to its users, becoming more of a mediator and facilitator than a product creator or owner.  This is the shift of control from institutions to individuals that the apparently relentlessly democratizing force of the Web has begun exerting on the business models of organizations of every description around the world.  As more organizations figure out how to apply Product Development 2.0 to their individual offerings, they will reap significant competitive advantage over those not harnessing the Web to directly connect to customers and begin a rapid and never-ending innovation cycle.  This is another aspect of the perpetual beta concept that reflects the fact that increasingly, products and services online are never finished, and indeed, can't ever be finished as changes and additions seamlessly pour in over thousands of millions of Internet connections.

But enough about the possibilities.  Let's talk some examples, both in terms of what older style product development did vs. what this new style is doing.  Finally, let's talk about some companies actually doing this successfully.  Note: Incidentally, though I normally write about services in terms of Software as a Service (SaaS) or Web Services, for the purposes of this discussion I'm talking about non-physical business processes for sale, such as car or medical insurance, tax preparation, etc. and not software.

Like the recently discussed Programming 2.0 concept -- a set of software development tools, techniques, and attitudes that is, not incidentally, enabling much of this -- and the original Web 2.0 definition, it is examples in lieu of principles that's one of the best ways to paint a picture of what appears to be happening in the evolution of product development:

While some will dispute what mainstream is defined as exactly -- with my own personal favorite being when my grandparents and their grandchildren both are doing whatever is under discussion -- the rise of consumer-powered media platforms has all the hallmarks of being something that's not only here to stay, but something that's increasingly pushing everything else off the stage.  Yes, I'm talking about blogs, but also wikis and every other kind of two-way, user controlled participation tool that is currently proliferating on the Internet in every country and almost all demographics.

Now before I present my case for the mainstreaming of shared, collaborative media, we should more carefully define the term that captures this best: social media.  Wikipedia of course has the most easily accessible definition of social media, describing it as "online tools and platforms that people use to share opinions, insights, experiences, and perspectives with each other. Social media can take many different forms, including text, images, audio, and video. Popular social mediums include blogs, message boards, podcasts, wikis, and vlogs."  The key here is that people are the ones that use and control these tools and platforms instead of organizations and large institutions.  Further, I would add to this that social media platforms tend to work best in networked environments , particularly on the Web, but also behind firewalls though to a lesser degree.  Why is the networked aspect so important?  Primarily because it's a powerful democratizing force due to its pervasive, low cost nature; anyone can get in the conversation with only a small investment of their personal time and access to a network.  And since communication is essentially free over computer networks today, combining an architecture of participation powered by network effects makes social media platforms almost certainly the most powerful form of media yet created.

These todays anyone posting anything on a simple blog lets them automatically reach the 1.1 billion users on the Web today.  And with syndication, social media content is picked up and spread throughout Internet via feed engines and the entire syndication ecosystem and can be found by anyone looking for information via Technorati, Google Blog Search, TechMeme or dozens of other innovative discovery mechanisms. At long last, hundreds of years after the invention of the printig press, anyone can truly reach a global audience by spending a couple of minutes of their time creating a blog on one of the hundreds of free blog sites.  I've highlighted in the past how social media has been used in both emergent and deliberate fashion to do everything from locating the survivors of natural disasters to motivating end-users en masse to create online video advertisements for a major corporation.

Of course, any effective technique or phenomenon has those who attempt to co-opt it or copy it, the latter which is the most sincerest form of flattery.  The recent Public Relations 2.0 flap, which ostensibly boiled down to whether or not traditional organizations can even conceive of how these new freeform platforms work, was a good example of how institutions firmly grounded in the 20th century struggle to understand the power shift under way.  Because these platforms are no longer under anyone's control for the very reason that the Web is a system without an owner, except all of us together.

Bounding the Social Media phenomenon 

But how significant is this really?  What are the compelling datapoints that tell use that social media is changing the landscape of communication, collaboration, and personal interaction?  David Sifry's quarterly State of the Blogosphere, most recently updated in October, is an excellent place to start. Taking a look at this, we can tracking over 57 million blogs, with over 900,000 blog posts a day on just about any conceivable subject.  3 million new non-spam blogs were created in just the most recent 3 months of tracking.  But blogs are primarily text and there are many other forms of social media and so it's worth looking at podcasting and video, two important types of social media that are growing rapidly with the spread of high quality, fast Internet connections.  Fortunately or unfortunately, unlike blogs, podcasts or video sharing do not have their own syndication system and for the most part they just ride inside the existing RSS/ATOM feed systems.  This makes it hard to discern what is really happening and so we can only pull on some individual data points such as Google Trends data showing the rapid rise of podcasting as a search term.

The video side of social media is a bit easier, which Hitwise and YouTube providing enough hard data on the most recent version of the YouTube Fact Sheet to get a general though unscientific impression of what's happening there.  According to this, YouTube has 60% of all online video viewers with up to 70 million viewers in an evening and over 65,000 videos uploaded every day, making it both the #1 online video site and #1 social video sharing site online.  This implies that most video consumption on the Web is already based on social media, and that there are over 115 million online viewers of video overall.  At least for video, social media is not an edge case and is they dominant model overall. Note: Yes, one can quibble about whether YouTube is truly a social media site and certainly it skirts the concept but in my book it makes the list. 

Why is YouTube considered Social Media though?  What aspects does it -- any many of the most successful media sites -- have that make it social and non-coincidentally so popular?  To understand this best, it's worth creating a list of what exactly must an aspiring social media platform actually have in order to be considered such.  Here is my take, culling the capabilities and features of the most popular social media sites as well as the consensus of leading thinkiners in this space such as Stowe Boyd, Tina Sharkey, and others.

Defining Social Media: Some Ground Rules
(as we understand them circa January 2007)

1. Communication in the form of conversation, not monologue.  This implies that social media must facilitate two-way discussion, discourse, and debate with little or no moderation or censorship.  In other words, the increasingly ubiquitious comments section of your local blog or media sharing site is NOT optional and must be open to everyone.
2. Participants in social media are people, not organizations.  Third-person voice is discouraged and the source of ideas and participation is clearly identified and associated with the individuals that contributed them.  Anonymity is also discouraged but permissible in some very limited situations.
   
3. Honesty and transparency are core values.  Spin and attempting to control, manipulate, or even spam the conversation are thoroughly discouraged.  Social media is an often painfully candid forum and traditional organizations -- which aren't part of the conversation other than through their people -- will often have a hard time adjusting to this.
4. It's all about pull, not push.  Like John Hagel and John Seely Brown observed in the McKinsey Quarterly a year ago or so, push-based systems, of which one-way marketing and advertising and command-and-control management are typical examples are nowhere near as efficient as pull systems.  Pull systems let people bring to them the content and relationships that they want, instead of having it forced upon them by an external entity.  Far from being a management theory, much of what we see in Web 2.0 shows the power of pull-based systems with extremely large audiences.  As you shape a social media community, understanding how to make embrace pull instead of push is one of the core techniques.  In social media, people are in control of their conversations, not the pushers.
5. Distribution instead of centralization.  One often overlooked aspect of social media is the fact that the interlocutors are so many and varied.  Gone are the biases that inevitably creep into information when only a few organizations control the creation and distribution of information.  Social media is highly distributed and made up of tens of millions of voices making it far more textured, rich, and heterogeneous than old media could ever be (or want to be).  Encouraging conversations on the vast edges of our networks, rather than in the middle, is what this point is all about.

The rise of social media platforms within businesses, often dubbed Enterprise 2.0 , will place a significant challenge on organizations as they try to grapple with the ground rules above.  That's because not following them will tend to reduce the long-term success and effectiveness of social media in business.  Also, increasingly, as more and more time and world-wide attention is given to social media, who really owns the discussions online will become a bigger and bigger deal.  YouTube recently announced they will begin paying their users for their video contributions (which are the seeds for often virulent conversation on that site), but they still place far too many restrictions on the content that is uploaded including making it belong to YouTube.

 Both of these trends show that when users are in control via the highly democratizing tools of the Web, the fundamental ground rules change.  Understand them, follow them, and embrace them, this is the pre-eminent media model for the 21st century.

These aren't the only rules for social software however, just social media in particular.  Be sure to check out my Notes on Making Good Social Software for more good ideas.

What else did I miss? What makes social media uniquely what it is? 

It's been nearly a year in the making but I'm finally pleased to announce the release of Real-World Ajax, a massive new compendium of the Ajax spectrum that I've compiled and edited with Kate Allen in conjunction with leading Ajax authors from across the country.  While not generally available until later this month, with full availability on March 19th at the AjaxWorld Conference and Expo which I co-chair with SYS-CON Media's Jeremy Geelan, this book marks a significant milestone in the brief history of Ajax, rich user experiences in general, and the growing challenges and opportunities in this space as we continue to witness a tectonic shift in the way Web apps are designed and built.

The inevitable conclusion: The Web page metaphor is just no longer a compelling model for the majority of online Web applications.  We are now rapidly leaving the era where static HTML is acceptable to the users and customers of our software.  Combined with the rise of badges and widgets, the growing prevalence of the Global SOA to give us vast landscapes of incredibly high value Web services and Web parts, it's important to note that the use of Ajax is essential to even start exploiting these important trends.  Skirting the corners of this phenomenon are also the non-trivial challenges offered up by largely abandoning the traditional model of the browser.  Specifically, what happens to search engine optimiziation (SEO), disabled accessibility, link propogation (along with network effects), Web analytics, traditional Web user interface conventions, and more, which are all dramatically affected -- often broken outright -- by the Ajax Web application model?

Some of these questions are answered directly in Real-World Ajax, but many are as yet relatively unanswered in an industry struggling to deal with a major mid-industry change.  The tools, processes, and technologies we've brought to bear to build Web applications are going to change a lot, as well as the skill sets.  As I wrote in my Seven Things Every Software Project Needs to Know About Ajax , these types of rich Web applications require serious software development skills, particularly as the browser is a relatively constrained environment compared to traditional software development runtime environments like Java and .NET.  

Of course, despite this issues -- even because of them -- it is a very exciting time to be in the Ajax business right now.  One big reason is that there are few Ajax products with clear market dominance yet and the dozens and dozens of Ajax libraries and frameworks currently available often a very diverse and compelling set of options for use as the foundation of the next great Ajax application.  While the Dojo Toolkit is probably the Ajax toolkit with the largest mindshare and lots of industry interest, the big vendors such as Microsoft and their Microsoft's ASP.NET Ajax (aka Atlas) show that the story is just as the first major products from big vendors make their way to market.  There's little doubt that we'll continue to see the Ajax market maturing and I'm looking forward to a variety of upcoming improvement to Ajax such as Project Tamarin, the high-speed Javascript engine donated by Adobe to the Mozilla project, the ongoing evolution of OpenAjax, and the 1.0 release of Dojo sometime this year, to name just a few of the exciting things that have the potential to ensure Ajax continues to grow and evolve. 

While we expect that Real-World Ajax will give you a front row seat to the thinking and techniques of some of the industry's best and brightest, here's a short list of things that are still not generally well known about Ajax:

• Ajax is based completely on the open standards of the Web.  Based entirely on XHTML, CSS, ECMAScript (the name of the standard for Javascript), and even XMLHTTPRequest, Ajax itself is nothing more than a technique that blends together open Internet standards that no vendor currently controls.  When used carefully, Ajax results in applications that are built on the Web as a true software platform, and as such means that there's no vendor lock-in, no licensing fees, and nobody to control the direction and destiny of your application but you.  That doesn't mean that many of the most popular Ajax frameworks don't break these standards in some minor ways, but with initiatives like OpenAjax, this too will be addressed soon enough.
• Currently, Ajax cannot be a complete rich user experience solution.  Even with pretty darn cool things that can be done with Canvas 3D and SVG support (the Dojo clock), there is just something Ajax cannot do: true rich media.  That means that Web apps that want to offer features that include video and audio must use another method of doing so, usually the Flash plug-in.  With some of the most effective new Web apps such as YouTube being rich media driven, this poses a significant challenge to the Ajax approach.  For now, a rich Internet application strategy simply must include a blend of Ajax and Flash and the attendant complexity in testing, skill sets, and integration.  Unfortunately, this has implications for the previous point since one particular vendor does control Flash at this time: Adobe.
• Almost all of the initial disadvantages of Ajax can now be countered.  Everything from search index addressability to accessibility to offline access and local storage has been addressed in one form or another.  The techniques for resolving issues with bookmarking, the browser's back button, page view analytics and others all currently have well documented work arounds or even entire frameworks that address them head on.  While memory leaks in the browser and the limited abilities of Javascript timers pose challenges still, they are no longer enough alone to hold back the majority of Web application development projects.  While freeform drawing and accelerated 3D graphics are also on the short list of Ajax capabilities not supported by more than a few browsers, these too are being addressed rapidly either by recent browser upgrades or interesting new plug-ins like WPF/E which will soon be common.

As for Real-World Ajax itself, I'd like to give thanks to the large team of expert authors we assembled to give you what we believe is the most complete picture yet on the Ajax user experience, one of the key planks of Web 2.0.  Not only does the material in Real-World carefully go over the basic Ajax technologies such as DHTML, XHTML, and CSS but there is also in-depth coverage of mobile Ajax, enterprise Ajax, and even a complete chapter that often fails to get enough coverage in the Ajax world: security.   Finally, the book includes several complete working Ajax applications as well as the video sessions from most of our previous AjaxWorld events.  A big thanks to Nancy Valentine, Yakov Fain, Richard Walter, Kate Allen, Jeremy Geelan, and Fuat Kircaali for making the book possible and to our great complement of Ajax authors: Jim Benson, Jason Blum, Kurt Cagle, John Crupi, Luis Derechin, Jay Fienberg, Corey Gilmore, Rob Gonda, Kevin Hakman, Ajit Jaokar, Dietrich Kappe, David S. Linthicum, Phil McCarthy, Dan Malks, Scott Preston, Anil Sharma, Coach Wei, and Greg Winton.

See you in New York City at AjaxWorld Conference and Expo later this month.  Also, there will be a book signing event where you can meet many of the authors as well. 

I'm here in New York City this morning at the start of the AjaxWorld Conference and Expo which I'm the technical chair for this year.  We expect it will be a exciting event that will bring the very latest developments in Rich User Experiences. I'll be blogging as much as I can about what's happening here -- and indeed on what seems to be a nonstop series of conferences coming up -- on this blog, on the Web 2.0 Journal, as well as on ZDNet . In fact, AjaxWorld is just the first in a several month long series of events as one Web 2.0-related happening after the other takes place.  It looks like this will be capped off  (at least in the first half of the year) by the expected industry blockbuster this year, the Web 2.0 Expo in San Francisco right in the middle of April.

In fact, there are a great many aspects to the way that the Web is changing and evolving in early 2007 and Ajax is only one of the elements of Web 2.0, yet it gets so much attention because it's enabling the browser to close the gap between what a Web app can do vs. a native PC application.  It's also the most visually obvous (and entirely optional) aspect of a Web 2.0 application.  But one things this is clear this year: Web 2.0 software models are beginning to evolve across the board. 

On the Ajax side this includes everything from very exciting major changes to the Ajax Framework Dojo expected to deliver the 1.0 version this year that businesses can finally commit upon, to real offline Ajax coming of age with everybody from Brad Neuberg (details here ) to Quinebox working on making sure Web apps can literally work any time, anywhere, on or off the network, which is one of the most serious complaints about Web apps for serious work use.  As for rich media (which Ajax can't do), the Flash platform is really starting to rise as well and Adobe -- which owns outright one of the few remaining vendor controlled technologies that helps run the Web today -- has Flex 2 and Apollo which could really change the RIA landscape this year.  OpenLaszlo also tells a compelling story in this space as does Microsoft with WPF/E.  This year really will begin the RIA technology war it seems.

Even more intriguing, we are seeing the emergence of genuine open Web component models such as what NetVibes has come up with recently with their cross platform widget API, known as the Universal Widget API, encouraging open, cross site widget compatibility.  Netvibes has made our best Web 2.0 software list two years in a row and for good reason, they remain the best Ajax start page out there and they also get how to fully leverage the Web.  Finally, if you're not sure why widgets are a make or break aspect of a successful Web app today, check out my two part series (Part 1 , Part 2) on the fast rise of the DIY (aka Do it Yourself) era.

There's far, far more going on with Web 2.0 of course than the user interface story, and Architectures of Participation, social media, and the many other relentless changes taking place on the Web are often the core of the value.  But as I say often, rich user experiences are now a virtually essential checkliist item for high quality Web software.  When presented with a static Web page vs. a satisfying, immersive rich experience, user's will vote for the latter nearly every time.  And in the flat competitive environment of the Web, you can't afford having the product that's not providing it.

Lots more soon from New York City as AjaxWorld proper gets underway tomorrow morning (Ajax Bootcamp is today which I'm leading off), we expect many announcements and new development.  Stay tuned!