As luminaries and pundits meet this week at the third annual Web 2.0 Conference, the Internet sector faces rotund challenges and exciting opportunities.
The event is being held in San Francisco at a critical time for the web. Opportunities to extend the success of the past four years are plentiful, experts say.
Bu the danger entrepreneurs have to worry about is that their companies need to be “Web 2.0 and not Web 1.1”, said Munjal Shah, co-founder and chief executive officer of Riya, which has attracted much attention because its search engine is based on image processing and recognition, instead of on indexing of photos' text metadata.
"A lot of people are jumping into the Internet space and investing in it aggressively, so you're seeing companies getting funded that maybe shouldn't be getting funded. This is creating a hyper and unhealthy environment," said Eric Chin, a partner at early-stage venture capital firm Bay Partners. This is a recent phenomenon, enabled by the low costs of hardware, software and bandwidth required to launch an Internet company, Chin says. This low-entry barrier is crowding the Internet market, and creating potential problems.
He sees big opportunities in what he calls "individual self expression" websites like Second Life, whose users are willing to pay to create virtual identities.