The great Web 2.0 landgrab

Money makes the World Wide Web go round

The Devil's Dictionary defines what is loosely called " Web 2.0 " as: "the name given to the social and technical sophistication and maturity that mark the - Oh, screw it. Money! Money money money! Money! The money's back! Ha ha! Money!"

It couldn't be more fitting. The acquisitions carousel has reached dizzying speeds lately. Almost no week goes by without Google announcing the purchase of a hip start-up. $1.65 billion for YouTube , $100 million for RSS management provider FeedBurner and $23 million for in-game advertising company Adscape Media .

Article continues below

Of course, it's all part of Google's effort to take over the world. But it's also a deliberate battle with Microsoft. One indication is the search giant's new tagline "Search, ads, and apps", reflecting a shift towards the software market and direct competition with Microsoft Office. Another indication is Google's effort to buy advertising company DoubleClick for $3.1 billion.

Microsoft, who was also interested in DoubleClick, reacted by announcing the acquisition of ad network aQuantive for no less than $6 billion. It also got the Federal Trade Commission to investigate the Google/DoubleClick deal. As Google has announced it would accelerate the pace of its buying spree to build out its portfolio, the two tech giants will continue to push each other to the limits.

When so much money is spent, other large companies obviously don't want to lose out. So we're seeing more purchases which are more speculative - in other words, we'll buy it before anybody else can.

eBay is splashing out $75 million for StumbleUpon and Fox Interactive is purchasing both Photobucket and video and audio editing service Flektor . All acquisitions are done for strategic reasons. Although it's quite easy to tell Fox will integrate Photobucket into MySpace, other acquisitions don't seem so obvious.

Web 2.0 hype

Without doubt, one of the reasons for the surge in shopping is the Web 2.0 hype, largely through the popularity of social networking. And so it makes perfect sense for a company with lots of money to buy a company that's fairly small but very successful and showing significant growth. Thus large companies can become even larger and more popular.

Usually, tech companies buy tech companies. CBS' purchase of hugely popular British music social network for a hefty $280 million (the largest Web 2.0 acquisition in the UK) is something new. It shows that companies handling more traditional entertainment content like CBS want a slice of the pie, too.

It's likely there are many similar deals in the pipeline. Record companies especially are worried the digital revolution will ruin them, so they'll keep a close eye on relevant Web 2.0 services.

It's a great time for exciting start-ups, that's for sure. Social network Facebook is the last really big player that's independent. Although founder Mark Zuckerberg has turned down an offer of around $1 billion before, it may just be a matter of time until a massive deal is signed. Hotly tipped also are internet TV services like Joost and Babelgum .

Unlike during the dotcom boom, most of the deals are done more carefully these days. A site must prove itself and boast a unique idea to attract a big golden chequebook. And for the bigger tech firms - well, they don't want to come too late and see one of their competitors snap up a great idea. Whatever happens, the users should be the ones to profit as large companies bring niche applications to the masses.

Oliver Lindberg