Google deal highlights Web 2.0 boom

By Martin LaMonica
Staff Writer, CNET News.com

Published: March 13, 2006, 4:00 AM PST

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news analysis Google's acquisition of a tiny Web word processing maker turns the spotlight on a growing number of so-called Web 2.0 companies struggling to survive--or angling to be Google's next purchase.

The Web search giant last Thursday confirmed it had bought Upstartle, which produces the hosted word-processing service Writely.

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What's new:
Google's acquisition of the Writely Web word processing service highlights a flurry of activity among so-called Web 2.0 companies, which are creating Web applications for everything from online calendars to video sharing.

Bottom line:
Analysts and entrepreneurs expect that the pace of acquisitions among Web application companies will continue, as large Web providers--Google, Yahoo, Microsoft and AOL--fill out their offerings.

More stories on Web 2.0

Though a small purchase--Upstartle employed only a handful of people--Google's move is significant because it further highlights the company's interest in Web-based productivity applications, which could be considered an online alternative to Microsoft's dominant Office desktop software.

It's hard to pinpoint which Web start-ups could be bought next. But analysts and entrepreneurs expect Google and competitors like Yahoo, America Online and Microsoft's MSN unit to continue scooping up smaller, niche companies and products to fill out their offerings.

"The general pattern is that big companies let the other companies do the innovations for them," said RedMonk analyst Stephen O'Grady. "Smaller companies can do innovation in a more agile fashion outside the boundaries of a large company, and they get acquired."

The deal has also rekindled speculation over Google's future plans. Observers note that a document-creation service like Writely could complement a Google project called GDrive to provide online storage.

The company has not explicitly said what it intends to do with the Writely service, one of a growing number of services often grouped under the Web 2.0 moniker.

Though it lacks a precise definition, Web 2.0 generally refers to Web services that let people collaborate and share information online. In contrast to the first generation of Web offerings, Web 2.0 applications are more interactive, giving people an experience more akin to a native desktop application as opposed to a static Web page.

In the area of Web applications, the last two years have seen an explosion in Web services aimed at consumers or small businesses. These services, many of which are still in beta, span many areas and companies. He's a sampling:

• Online Calendars: One of the more active areas, with offerings from 30 Boxes, CalendarHub, Trumba, Joyent, Kiko, Planzo and Spongecell.

• Productivity application suites: Full-blown applications bundles offered by the likes of HyperOffice, gOffice and ThinkFree.

• E-mail and collaboration: Examples include Goowy, Zimbra, Meebo (Web-based instant messaging) and Jotspot (hosted Wikis).

• Project management and personal organizers: AirSet, 37Signals.com, Zohoplanner and Stikipad.

• Multimedia social software: Includes sites like the popular Flickr photo sharing service, Riya (photo search), You Tube (video sharing) and Podbop (music podcasting).

Why the sudden boom in Web 2.0 companies? There are a few reasons, both technical and business related, say investors and analysts.

More people have high-speed Internet connections, making applications such as photo, music and video sharing feasible. The underlying software to build Web services is being upgraded as well, lowering technical barriers that existed only two years ago.

More Web developers are using a programming technique known as AJAX, which stands for Asynchronous JavaScript + XML. The end result of using AJAX is interactive Web pages and sites that can automatically refresh information from a server. Overall, it makes for a better user experience, say developers.