Tim O’Reilly on The Current Stage of Web3

Tim O’Reilly, the person who defined “Web 2.0” 17 years ago, comments on the current stage of Web3.

I like to remind people that I wrote “What Is Web 2.0?” five years after the dot-com bust with the explicit goal of explaining why some companies survived and others did not. So too, I suspect that it won’t be till after the next bust that we’ll really understand what, if anything, Web3 consists of.

From the last bubble go round, I can offer several pragmatic observations in addition to the technology and business-model changes I had tried to capture in “What Is Web 2.0?”

1) All of the companies that survived were making money—a lot of it. (In the case of Amazon, it was free cash flow, not profit, but the numbers were huge, as was the business and economic insight behind it.) Their valuations, while high, were supported by plausible models of future earnings and cash flow.

2) None of them needed to raise enormous sums of money by today’s standards. (Yahoo’s total pre-IPO investment was $6.8 million, Google’s $36 million, and Amazon’s $108 million.) When you see companies go back again and again to investors for funding without ever reaching a profit, they may not really be businesses; they may better be thought of as financial instruments.

3) They all had millions, then tens of millions, then hundreds of millions (and eventually billions) of daily active users for world-changing new services.

4) They had all built unique, substantial, and lasting assets in the form of data, infrastructure, and differentiated business models.

5) The companies that came to dominate the tech landscape during the next generation were not all up-and-comers. Apple and Microsoft handily made the transition to the next generation, and in the case of Apple, even led it.
Keep in mind that it was still early when the dot-com bubble popped. Google Maps hadn’t been invented yet, nor had the iPhone and Android. Online payments were in their infancy. No Twitter or Facebook. No AWS and cloud computing. Most of what we rely on today didn’t yet exist.

I suspect it will be the same for crypto. So much is yet to be created. Let’s focus on the parts of the Web3 vision that aren’t about easy riches, on solving hard problems in trust, identity, and decentralized finance. And above all, let’s focus on the interface between crypto and the real world that people live in, where, as Matthew Yglesias put it when talking about housing inequality, “a society becomes wealthy over time by accumulating a stock of long-lasting capital goods.” If, as Sal Delle Palme argues, Web3 heralds the birth of a new economic system, let’s make it one that increases true wealth—not just paper wealth for those lucky enough to get in early but actual life-changing goods and services that make life better for everyone.

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