Why There’s Been No IPO for Web 2.0

The modus operandi for Web 2.0 sites to date has been to grow the site big enough to have it snapped up by a bigger fish. Unlike the "Web 1.0" move which was to go public as fast as you could without being purchased, Web 2.0 sites seem to be treading water while waiting for a Google or Yahoo! offer.

The real question is why. What has the big change been? Michael Kanellos quotes Opus Capital partner Ken Elefant on the CNET blog , and it's a money issue, as you'd expect. Elefant estimates that a Web 2.0 site needs to have 1 billion page views a month to even have a HOPE of a public offering. One billion. He breaks the math down as follows:

A web 2.0 company needs to be pulling in around $5 million in revenue a month to become an independent, viable publishing house. The average CPM is around $10. About half of the inventory on a given site remains unsold so the real CPM is closer to $5. Thus, you need 1,000 CPMs a month. A thousand impressions go into CPM.

What initially caught my attention in the article, though, was a quote from Elefant that echoed something I'd said when talking about Famousr: Elefant pointed out that "Most of them are features." There are already a slew of social networking sites out there, and color me crazy, but it would seem to make MORE sense for companies to partner up in a mash-up with MySpace or Facebook to provide niche social networking sites, rather than creating new ones that will appeal to a limited market, one that will never bring in Elefant's magic billion.

In the past ten days alone the Christopher and Dana Reeve Foundation launched The Paralysis Comunity, and Inpowr launched the first stage of what they promise will be the web's "first platform for self-exploration." And soapcentral.com seems like they were at least TRYING to go about social networking the right way, but chose to set up their niche site using MindSay , who has their own social networking site of a mere 150,000 users (small change when it comes to sites like Facebook and MySpace) while also implementing solutions for other sites.

Still not sure that many of these new apps are merely features? Take a look at Google's response to the momentum being gained by StumbleUpon. With a mere update to their toolbar, they added a cute little dice icon that will send you to a site based on your own search history. Sure, it eliminates the social aspect of StumbleUpon, but it also doesn't need to be trained since it already knows what you've looked at, and it doesn't require a plug-in. That's all it took: one update to an existing toolbar that countless people are already using, which, in itself, is a plug-in for a browser. StumbleUpon is rumored to be getting acquired by eBay, but before that rumor, it was listed as one of the "Web 2.0 companies to watch."