The Irony of Web 2.0

There has been a lot talk about the “edge” lately... not the least of which is Edgeio, which is a classified edge aggregator. The whole idea behind the rise of the edge is that traffic patterns are getting more distributed on the web and that core portals/walled gardens are getting less and less of the total traffic while “edge” sites are getting more... or using another term, the long tail of websites is growing longer and longer as niche websites gain traction and usage.

There are some preliminary data that is actually pointing to the fact that the pendulum MIGHT be swinging to the other direction. That “edge” site traffic growth is slowing and that concentration is actually growing. Looking at Google Q4 #, it appears that adsense (edge advertising) revenue is pretty flat and that adword (core advertising) revenue is growing significantly faster. Furthermore, I am willing to bet that TAC concentration is also up for adsense and that the sites that adsense are acquiring now are much lower quality (traffic/click through) then only a year ago. While Google is an edge aggregator, it is still a “core” site (wall garden or not... actually very much a one way walled garden!, value comes in but never leaves!).

I think there is actually 2 trends that is driving the slow down in edge growth...

1) PageRank or any other relevancy algorithm favors the incumbent/core sites FOR EACH KEYWORD. In 1999, most of the web was dominated by huge portals that had dominated “relevancy” very broadly... in the ensuing years, the edge grew as niche sites found dominant niches (symbolized by “keywords”). It looks like each one of those niches has essentially been filled up and that 3rd or 4th (actually more like 20th because average page click is 2 in a search engine) entrants no longer could gain the traffic that they need from search engines to survive.

This will be an even harder issue to solve for edge commerce aggregators who need to rely on “relevancy” to determine not only relevance but trustworthiness. In essense, posting “a classified ad” in any blog will be a futile exercise because traffic will eventually be funneled to a select few sites with encumbent relevancy history.... and those sites will eventually be smart enough to “farm” out their reputation to host listings... again augmenting the core rather than the edge. This is not to say that Edgeio or the likes wont be successfull... it is to say that their key differentiation/barrier to entry will be their DIVERSIFICATION algorithm and not their reputation/relevancy algorithm. (Barrier to entry/exit is extremely low in the aggregation space and will be their achilles heel)

2) For now, the segment of users that are likely to “own” their own digital presence has probably peaked. Most will likely rely on “core” destinations like typepad or myspace (to give 2 really different examples) for hosting needs. These “mainstreet” consumers are truly the long tail, not the blogosphere or the technorati crowd.... even more likely they will still rely on vertical sites for specific purposes rather than a generic presence aggregator. In many ways, task specific core sites does a much better job of serving the true long tail than a persistent digital presence. This might not be a permanent trend as Gen Y grows up but for now, the growth of pure edge URL’s might be slowing until then.