In light of Newsweek's discovery of Web 2.0, I had an "enlightening" chat with one of Kijiji's Canadian managers yesterday. It went something like this:
Me: "So what's Kijiji's business model? How does it make money?"
Them: "We don't have a business model. Everything on the site is free."
Me: "Oh, then I guess Kijiji is a real Web 2.0 company."
For months, I've been ranting about how the lack of viable business models within all these cool Web 2.0 services/applications is a huge and troubling problem. How can you create a business if the service is given away free? - and I'm not talking about jumping on the AdSense bandwagon. If, like me, you have a thing about revenue and profits, the vast majority of Web 2.0 ventures make no sense other than being vanity/make-work projects or hobbies for smart developers.
   But maybe I'm taking a totally wrong approach. Maybe Web 2.0 isn't about creating businesses but, instead, a tool to show off the true power of the Web as a communication, collaboration, entertainment and e-commerce engine. Perhaps the Web is going through an important, but necessary, stage focused on showing how easy it is create new services and start new companies. This contrasts with the dot-com boom where it looked expensive to start and establish a company online. Perhaps what happens next is all the lessons from the dot-com boom and all the lessons from the current "development boom" will be used to create a new formula that provides a path for the establishment of innovative, low-cost, money-making businesses. Maybe this is what I've been missing for the past six months. Then, I could be wrong.
Update: BusinessWeek has a story that Facebook.com - a classic Web 2.0 company - is looking to be acquired for as much as $2-billion. The social-networking company was started two years ago by Mark Zuckerman, now 22, at Harvard University. It raised $500,000 in an angel round from Peter Thiel in September 2004, and pull in another $12.7-million last May from Accel Partners. Mathew Ingram weighs in on Facebook's prospects.
Update: Fred Wilson has a new Web 2.0 business model description called Fremium whereby a company provides a service for free to attract as many users as possible. Then, it rolls out premium services to generate revenue. The challenge with this model is whether users balk at paying for something they've been getting for free.

Jimmy Wales, who either founded Wikipedia or co-founded Wikipedia or simply jumped on someone else's idea, has pulled in $4-million for Wikia Inc., which used to be known as Wikicities. The money comes from Bessemer Venture Partners (an early Skype investor), Pierre Omidyar's Omidyar Network and some high-profile angel investors: Dan Gillmor, LinkedIn CEO Reid Hoffman, Joichi Ito, Marc Andreessen and Mitch Kapor. If you're not aware of Wikia, it's a very smart offshoot of Wikipedia. Wikia provides anyone looking to set up a Wiki with a Web-based platform - whether they want to create a community events site or an online forum to talk about sports. Wikia makes money from selling relevant ads on theses sites (currently from Google). The magic behind Wikia is scale. The more Wikis created - there are more than 1,000 already - the more the company's platform is leveraged. Wikia could also be a good vehicle for Wales to back away from Wikipedia - a move that could defuse criticism that he's too much of a micro-manager for the open-source, volunteer-based encyclopedia. Another intriguing part of Wikia is Gillmore's involvement. In the past six months, he has joined FON as an advisor (who could be compensated if the Wi-Fi network takes off), backed off on accepting more venture capital for Bayosphere, and now invested in Wikia. It seems Gillmore is creating interesting - and potentially lucrative - post-journalism career, which should be encouraging news for all us hacks out there still toiling away for the man!