Debating The Next Phase Of The Web

The Web 2.0 Summit is offering live coverage from the event’s main stage.

Host Robert Siegel speaks to Tim O'Reilly, the founder and CEO of O'Reilly Media, about the annual Web conference he organizes and moderates called the Web 2.0 Summit, being held this week. O'Reilly says that the Internet economy is undergoing the biggest shift since the dot-com bust, and companies are vying for different "points of control." He's invited heads of tech companies like Facebook, Google and Yahoo, and Internet insurgents and "alpha nerds" to talk about the next phase of the Web.

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ROBERT SIEGEL, host:

Facebook made its announcement just ahead of the annual Web 2.0 Summit held this year in San Francisco. The conference is a chance for tech CEOs and Web innovators to discuss the future of the Internet. The speakers list includes Facebook's Mark Zuckerberg and Google's Eric Schmidt. This year's theme: points of control, the battle for the network economy.

And joining me to discuss that is Tim O'Reilly. He's in San Francisco. He and a partner run the tech summit. Welcome to the program.

Mr. TIM O'REILLY (Founder and CEO, O'Reilly Media): Thank you for having me.

SIEGEL: And I should say, you've been credited with coining the term Web 2.0, and you've been nicknamed the oracle of Silicon Valley. So I'm going to draw upon your oracular powers right now. What's next?

Mr. O'REILLY: The biggest thing that's next, that's on everybody's mind is the transition to mobile. Right now it is not obvious where that's going to take us. Everybody's enamored of the iPhone, the Google phone. But the applications are going to change. You know, we're going to start using our phones for shopping. It's going to change the nature of advertising. But once people start being accustomed to pay for digital goods with their phone, I believe they're going to feel much, much more comfortable paying for physical goods.

And we're going to start seeing more mechanisms, whether it's near-field communications built into the phone, where you can just wave your phone over some kind of pickup device to pay or whether it's barcode scanning with the camera on the phone, or even other more sophisticated means of recognizing who you are and where you are, and just debiting your account.

SIEGEL: Who, then would be the losers? Who are the dinosaurs as this transition is taking place?

Mr. O'REILLY: Credit card companies, for example. Increasingly, the big players in commerce are trying to get people to do direct debit of bank accounts.

SIEGEL: Cutting out the middle man.

Mr. O'REILLY: Cutting out the middle man, so to speak. I think there's clearly a big battle shaping up between Amazon and Google, which I don't think enough people have focused on. And between Amazon and everyone else. Amazon is increasingly dominating online commerce. People are starting their searches there, which of course threatens Google because it takes away some of the lucrative product search business that Google has. But, really, I think Amazon is now, you know, they've gone so far beyond books, every retailer in the world has got to be scared of them.

SIEGEL: If I understand you, and I looked at the interactive map on the points of control that you developed for the Web 2.0 Summit, we're at a time, you see, where there are very big powerful players here in the Web. And pure innovation may be less significant than the battle for control over things that have already been innovated.

Mr. O'REILLY: Yes. I think this is something that happens in every industry. You have a period of ferocious innovation because it's all a grain field. And at some point, settlers start to collide, you know, and you have wars over territory. Apple creates this fabulous new smart phone. And then Google says, oh my gosh, you know, if Apple controls the paths to the consumer and mobile, we're hosed. Increasingly, there's collisions over who's going to be running different types of content. Everybody wants to be in ebooks, for example.

But it's not always the big expected players. You know, there were a lot of players who were going out to dominate online movies. And it looks to be Netflix who's made that transition most successfully.

SIEGEL: One last point, technical innovators out there, you've spotted them in the past, whom should we keep an eye on right now?

Mr. O'REILLY: Well, two things, I think about hardware innovation in the sense of ubiquitous, tiny censor-driven applications. That you're going to touch everything from health care to consumer electronics to shopping. We can build devices now that will embed the Internet into the fabric of everything. And then the other side of that are the big data predictive analytics engines that make sense out of that data.

At their heart, applications like Google and Facebook and Amazon are amazing analytical engines. If the Federal Reserve worked like Google, if, you know, the financial regulators who were supposed to be watching over Wall Street had worked like Google, they would've caught a lot of the problems that were happening in real time. They wouldn't have waited until after the financial disaster hit.

Just as the PC bled back into industrial economy, I think the Internet is going to bleed back into our overall economy and have a transformative effect on major sectors that we don't yet foresee.

SIEGEL: Tim O'Reilly, thank you very much for talking with us.

Mr. O'REILLY: Thank you very much.

SIEGEL: Mr. O'Reilly, who runs Web 2.0, the summit underway in San Francisco, is also the CEO of O'Reilly Media.

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