In the ear of the ‘new Internet’, dubbed web 2.0, the consumer is truly the king. He decides how to use applications like podcasting, tagging, blogs, social networking, mashups, and wikis, and is at the center of the primary principle that drives web2.0: User Generated Content (UGC).

This has allowed entrepreneurs to cash in on their unique and imaginative ideas involving the user, and has given rise to a surge in Internet start-ups. A recent Dow Jones VentureOne study reported that a total of 49 start-ups were funded in the first half of 2006 as compared to 59 for all of 2005. VCs too are cocking up their ears, not wanting to miss out on the action. Investors reportedly poured in $263 million into Web 2.0 companies during the first half of 2006, as compared to the $199.1 million for the entire year of 2005.

Three basic trends have transformed the Internet into a hotbed of innumerable opportunities for entrepreneurs. First are the benefits emerging from the omnipresent broadband. Second is the low cost of web infrastructure and presence of open-source programming tools like MySQL, PHP. Third are the technologies like Ajax transforming web-based software into graphical and interactive desktop applications.

While on one hand this denotes abundance of opportunities given future market potential, on the other, the plethora of ideas can mislead an entrepreneur easily. Salil Deshpande, Principal, Bay Partners opines that entrepreneurs currently have too many ‘innovative’ options to choose from the mixed bag of Web 2.0 – one would never know what works, until it does. While Deshpande believes new investments will flow into novel business models only, he encourages Web2.0 entrepreneurs to look into intelligent aggregation and filtering and prioritization the content.

The past success of entrepreneurs in Web 2.0 had been based on their ability to leverage on this low cost of infrastructure to generate a successful businesses model. One such successful entrepreneurial attempt came in the form of MySpace, a social networking site seeded from a garage. Today it is garnering 80 percent of visits to total online social networking websites and was recently bought by media giant Rupert Murdoch for $580 million. YouTube, another such venture focused its business model on allowing users to post online videos for free. Today, the portal hosts 60 percent of all online video content. One of the major successes of Web 2.0, it was acquired by Google for $1.65 billion.