Technological & Economic Stack - Web 2.0

User-as-a-product model

  1. User exchange information (Facebook), products (eBay), services (Uber, AirBnb) using centralised services - the trusted third parties.
  2. User's data - posts, reviews, GPS locations, auctions - are recorded in the closed database owned by an economic entity focused on revenue growth and maximising shareholder returns.
  3. Indexes, filtering algorithms, UI/UX are centralized on the platform side to maximize lock-in, time spent & data extraction.
  4. To ensure its revenue growth, entity operating the service has to extract more data and attention from users, and prevent other entities from accessing this data.
  5. Revenue growth is achieved by selling data to third parties.
  6. Users don't participate in revenues generated from sales of their data. They don't acquire stake in platform either.

The business model of web 2.0 platform relies on extracting data from users and selling it to advertisers.

Key challenges of the web 2.0 model:

  • value creation is decentralized but the wealth accumulation is centralized,
  • the entire techno-economic stack is optimized for constant extraction of data & attention from users,
  • user incentives and stakeholder incentives are not aligned.
  • competitive advantage is created by collecting more data, creating more user lock-in, imposing high transition costs.
  • user interfaces are designed to be addictive to maximize time spent. Interruptions and notifications are on by default etc.
  • users have no stake in their data, switching costs are artificially high to secure market advantage by platforms