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Failing Web 2.0 stars pray for copyright abolition

Wanted: starving artists to help out web tycoons

Remember the date - the one about an inch above the words you're reading now. 27 May 2008.

Two articles were published today of some note, and if you can put them in context, you can begin see the true, scary picture of internet economics today. The one that's usually too scary for the posh papers or broadcast media to describe.

Exhibit One is a deadpan report in the Financial Times, bylined to Chris Nuttall and Richard Waters. It's titled, "Web 2.0 fails to produce cash ".

This could be the least-surprising headline of this (or any) year. Dog Bites Man rarely makes the news. As we predicted years ago, Web 2.0 was only ever a rhetorical bubble, designed to boost a clutch of no-hope investments into the arms of an acquirer. For a handful of others - mostly pundits - it was a lifeline from a dead-end media job into gurudom. It didn't take a genius to work that out.

(We also despaired that Web 2.0 failed to address any of the significant technical challenges of the day. Which, alas, has proved true - even after VCs have spunked $1.5bn of cash at the Javascript kiddies, we're no nearer to solving these problems. That's because Web 2.0 was "interface" level people trying to solve "infrastructure" level problems - which is a bit like supposing that a talent for painting garden gnomes qualifies you for designing skyscrapers that don't fall over.)

Nuttall and Waters point out that now the VC money is drying up, investors can see that there's precious little to show for Web 2.0 in terms of sustainable businesses.

A good example is YouTube. Acquiring the site cost Google $1.7bn, but even with a "global" audience and Google's best brains now piloting the operation, it only earned $31m last year. Even bullish analysts (Bear Stearns) don't expect this to get beyond $90m this year, and around $165 in 2012. Page rates, which the industry measures in CPMs (cost per thousand), will barely eke above $5. Someway short of hopeful, recent estimates.

So where do Web 2.0 companies go from this vale of tears, this endless sea of red ink, populated by the pastel-coloured rounded rectangles of sinking startups?

Exhibit Two gives us a clue.

We're broke. Can you help us?

It's a post by Gertrude Stein-lookalike Michael Arrington, an investor who hypes companies he invests in. And who recently suckered the Washington Post into reprinting his nepotistic little tip-sheet, Tech Crunch.

"It’s time to rethink copyright laws, and it’s time for copyright holders to rethink their business models," he urges.

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