Mahaney on Web 2.0

Mark Mahaney of American Technology Research sent out his wrap-up of the Web 2.0 conference this morning.

“The overall tone was highly positive,” Mahaney wrote. “This will sound odd, but we detected a swagger to the event that reminded us of 1999 and early 2000. And yet, we also detected a more level-headed, battle-scarred, and determined attitude. “Hard work ahead, but rewards if we do this right” was our way of capturing the tone versus the “low-hanging fruit, sky’s the limit” attitude that we remember from 1999 and 2000. And this change of tone is an investment positive for the sector.”

Mahaney said he is also more convinced, not less, that Google is working on a Web browser. Follow the link below to read the full note.

Internet � Mark Mahaney

Taking the Pulse of the Internet Industry at the Web 2.0 Conference

The Web 2.0 Conference was held in San Francisco over the past three days. We briefly detail in our note some of the key themes and data points we picked up at the conference.

The conference included presentations by executives from most of the leading Internet companies — Amazon.com, Ask Jeeves, CNET, eBay, Google, Microsoft, Monster Worldwide, and Yahoo! This was not a Wall St./investor event — the purpose was to have Internet leaders (from both public and private companies) discuss some of the key opportunities and challenges facing the industry today. Among the broad topics: mobile platforms, online music, search, open source platforms, and online gaming. The event was very similar to the conferences held back in 1999 and 2000 by the now defunct Industry Standard magazine.

The overall tone was highly positive. This will sound odd, but we detected a swagger to the event that reminded us of 1999 and early 2000. And yet, we also detected a more level-headed, battle-scarred, and determined attitude. “Hard work ahead, but rewards if we do this right” was our way of capturing the tone versus the “low-hanging fruit, sky’s the limit” attitude that we remember from 1999 and 2000. And this change of tone is an investment positive for the sector.

There was essentially no discussion of financial models and no discussion whatsoever of current quarter results. But there were still several interesting themes and data points:

1. Amazon.com CEO Jeff Bezos reviewed two of the company’s very recently announced Web services — Amazon E-Commerce Services and Alexa Web Information Services. The E-Commerce Services provides to third parties access to information and customer reviews for all Amazon product categories, while the Alexa service provides Web developers with access to the Internet traffic and usage data that Alexa collects. We view neither of these services as having a material direct impact on Amazon’s P&L, but they do potentially expand the scale of Amazon’s platform, which is a positive.

2. Google Board member John Doerr made comments that were interpreted in some press reports as indicating that Google was not seeking to develop a browser. But our take on his statements — including an assertion that there had been no major browser innovation in years — was different. Based on his comments and on data points we picked up from others at the conference, our conviction level is higher that Google is indeed working on a browser.

3. Peter Norvig, the director of search quality at Google Labs, unveiled three initiatives that Google is currently working on — statistical machine translation, named entities, and word clusters. The goal of these is to improve the understanding of meaning in written words. To the uninitiated — including us — statistical machine translation means language translation (as far we can tell). Peter demo’ed Arabic to English and Chinese to English language translations that appeared fairly accurate….well, at least, the English phrasing appeared generally correct.

4. Representatives from Yahoo!, MSN, Ask Jeeves, and Amazon.com’s A9 search unit appeared to agree during a panel that two of the most important innovation focus areas for search now are integrated desktop search and personalization. In general, the representatives from these companies expressed a high level of confidence in the future growth drivers for search advertising – term coverage, pricing, search traffic, etc…

5. Idealab CEO Bill Gross launched a new search engine at http://www.snap.com , which contains some significant new features, such as refined subset search functionality, the ability to sort search results by click-thru rates, flexible payment structures for advertisers (pay per click, pay per transaction, pay per action, etc…), and substantial metrics transparency. While we wouldn’t view snap.com as a likely major new competitor to the leading search engines, the simple take-away for us is that no one company has a monopoly on search innovation.

6. Louis Monier, the director of eBay’s Advanced Technology Group, provided what we thought was a strong rebuttal to the argument that search could dis-intermediate eBay’s business. The question posed to him was essentially — “If people can use search to find anything, why do they need eBay?” His response was that eBay’s trust and safety initiatives, its buyer and seller protection policies, its payment solutions, its sense of community, and its market place infrastructure combine to create an enduring customer value proposition.