Hitwise reports that the reports of Delicious‘s death at the hands of an apparently apathetic Yahoo were at least somewhat exaggerated. It seems that Delicious’s traffic has doubled since it was assimilated by Yahoo in December 2005.

That’s pretty impressive since it appeared from the outside like Yahoo forgot all about Delicious after it swallowed it. I am a moderate Delicious user, and I think it is by far the best bookmarking site out there- mostly because it doesn’t try to overwhelm you with unnecessary features. It follows my business rule no. 1 by doing one thing better then anyone else. Too many companies these days try to do everything and become average in the process.

While the traffic numbers are impressive, as Steve Rubel points out, Delicious, like almost all of Web 2.0, is still mostly populated by geeks. But the income demographics that trend towards the high end show that Delicious has valuable eyeballs.

But I have to ask the same question I always ask in this case- how does Delicious intend to turn these eyeballs into cash?

And I also wonder if the traffic numbers would be even better if Yahoo actually marketed Delicious.

“Peer-to-peer (P2P) networking is once again catching the imagination of the venture capital community in Silicon Valley.”

– Om Malik talking about the humorously named SkyRider.

The parallels to Bubble 1.0 are getting downright uncanny. The fact that somebody tossed $8M at a company named SkyRider is equally hilarious and frightening.

As long as we don’t start hearing about a SkyRider IPO, there’s still hope.

That’s the lesson I feel like screaming at all the people acting like AOL’s much anticipated decision to “go free” and to give 5GB of storage to its users is a brilliant idea.

Growth without revenue or a realistic plan to generate sustainable revenue is nothing more than a way to create additional expense. It ends up on the wrong side of the ledger. Granted, this sort of charity will generate some headlines, as Marshall Kirkpatrick points out:

“From giving away many previously paid services free to broadband users (yesterday) to hiring away top social bookmarkers (first 10 announced today) and now throwing free storage at anyone who wants it – AOL is certainly making a lot of plays to revive itself.”

But it’s a clever head fake at best. If I started a business that gives away $20 to every person who walks by my house, I too would have a fast growing business, and I too would get lots of headlines. Perhaps even a link from Om. I would also run out of money pretty quickly.

AOL hopes all those users will click on ads and buy stuff so the loss of subscription revenue will be offset by more ad revenue. Nobody clicks on ads and nobody buys stuff because of all the ads people stick in front of their face. Entire industries are being built around ad avoidance (TIVO, satellite radio, etc.) at the very same time AOL is betting its future on the success of ads.

This move by AOL smacks of desperation. It is going to stop selling its service and climb on the back of the ad dollar along with 95% of the rest of the Web 2.0 world. In effect, AOL has just become an online newspaper, fighting for the same ad dollars as the rest of its Web 2.0 brethren- and the rest of the online and offline newspapers. In an effort to be like Google, it has put itself in the same predicament Google is in- the frantic search for eyeballs in the hope that somehow a little alchemy can turn those eyeballs into cash.

The myth of the infinite ad dollar is a house of cards I tell ya. And it’s going to implode one day.

Annoyingly, existing AOL users have to navigate through a maze to find out how to turn their account into a free account, and even at the end of the maze, you’re required to make a phone call and enter an even bigger, more frustrating maze. If free is so good, why are they making it so hard for people to be free?

Ted Leonsis of AOL does his best to spin this news like its some brilliant new strategy, as opposed to a recognition of the inevitable fact that the market for AOL’s paid services is shrinking. Mr. Internet chimes in with his take as well.

I can’t blame them for trying- they’re trying to make money, after all. But let’s take a closer look.

Ted Says:

The new plan is about growth. It is about changing the focus of our teams and resources. It is about having a green thumb and showing the world that we have green arrows pointing up in all of the key metrics that are important to our business. It is about a simple and logical statement of fact – AOL should never lose another customer to a competitor, and we should be able to expand rapidly on a global basis as the high-speed free Internet gains even greater momentum.

Mr. Internet Says:

Yes, yes, yes… it is so hard to run a business that has two different focuses. In our case the focus was keeping the dialup subscribers and building free services. These collide all the time. For example, today’s free 5 GIG of storage–the boldest move AOL has done since buying Weblogs, Inc and moving Netscape to social news–would have been a service reserved for our paid members. Then Google would offer it for free and our members would be paying for something they could get for free–again (just like email and IM). This constant back and forth is really draining for the members and for the executives. Smart people can make both arguments (free vs. paid), but at the end of the day you have to pick where the ship is heading and we’re picking free.

Common Sense Says:

If Dell started giving away its exploding laptops, it wouldn’t lose many customers to competitors either. Didn’t these guys take Economics 101? Picking free is only a good choice when no one wants to buy what you’re selling. And if no one is buying what you are selling, you aren’t a business. I’d change the word boldest in Mr. Internet’s post to most desperate.

Revenue, revenue, revenue. Sustainable revenue. Say it with me.

That word revenue is mentioned a total of 4 times in Ted and Mr. Internet’s posts. Four times in 2319 total words. And except for one vague mention of multiple revenue sources, it always follows closely behind the word ad or advertising.

Speaking of multiple revenue sources, I wonder how AOL’a dial-up customers feel about the fact that they get to keep ponying up their subscription fees while broadband users get the goods for free? I understand the logic behind this, as the demand for AOL from broadband users is likely small and getting smaller. But it still sounds like AOL is sticking it to the people who, AOL believes, don’t have as many options as broadband users. Many of whom are likely some of AOL’s oldest customers.

Like most, I learned the internet on AOL. I have been a defender of AOL in the past.

But this move looks like the desperate act of a desperate company.

Update: Dwight Silverman reports that you can now switch to the free plan online. I just did it and it was very quick and easy. Now at least I’m not paying for the AOL account I never use.

Somehow I’d missed all the talk about Blummy, until I saw Steve Rubel’s post today.

I was intrigued, so I signed up and gave it a try…and it is really cool. It’s going to save me some serious researching and writing time.

I have added Wikipedia lookup, Whois lookup, Alexa stuff, Google Blog search, IMDB search, the tinyurl maker and the Delicious playtagger add.

I wrote one for AllMusic.Com (it’s now available and is called allmusic).

Here are the other “blummlets” I will make shortly:

One for Allyoucanupload.com
One that will make an image link from any image

I am excited about Blummy. Give it a try.

[App & Photo Repository Joined the Deadpool- too bad, it was a glorious victory]

Well, OK. So my long lost cousin Bunny had a little somthing to do with it. Maybe no one will notice the fact that almost all of the Rubel photos are him and none of the Newsome photos are me.

A pretty cool little application. Go pick a fight!

Donna Bogatin at ZDNet has an interesting article today asking who’s making the real money in Web 2.0.

Is it really the application developers who spend countless hours and piles of money creating occasionally amazing products that they turn around and give us for free? No, at least not yet.

Or is it the VC community with a ton of money that needs to be invested somewhere, who are trying and mostly failing to recreate the once lucrative greater fool pipeline to sell these free products to rich fools like Yahoo or poor IPO-happy fools like you and me? No, at least not yet.

Or is it the thoughtful user who takes a free product, mixes in some hard work and self-promotion and becomes a new media star? Yep, at least so far.

If you don’t agree, ask yourself this: would you rather be a fledgling Web 2.0 developer, which is the functional equivalent of being in a pick-up basketball game and hoping to make it to the NBA, or would you rather be Mike Arrington or the guys at Techdirt, which is like being Bob Costas?

Would you rather be working on the 5,913th free online calendar application, or would you rather be the woman known as “Forbidden” on MySpace?

One more. Would you rather develop a YouTube clone, or be a film maker growing an audience and a reputation on YouTube’s nickel?

The real winners are the people who use the free infrastructure provided by these so-called businesses to create something that is both valuable and portable- a brand. If someone builds a freeway that leads to fame and fortune, it’s not the builder who makes the real money, it’s the people who ride that freeway as far as it will take them.

It’s almost like Web 2.0 has turned business theory upside down. It’s not the author of the book that gets the run in Web 2.0, it’s the company that binds the book. Maybe that’s the price they charge for giving everything away.

If so, that’s OK.

Forbidden and others will laugh their way to the bank, while the Web 2.0 companies sit and wait for the next AdSense check to arrive.

Knowing in the back of their minds that the next one might be the last one.

Rob Pegoraro of the Washington Post has an article about the crack that has developed in the IM wall thanks to the deal between Microsoft and Yahoo to allow their IM clients to cross proprietary borders and communicate with each other.

In addition to pointing out the fact that users have to have the latest version of each application to speak cross-network and outlining some some hiccups that have occurred thanks to the lack of an open standard and the resulting difficulty in erecting a bridge between two walled-in networks, Rob also describes the main reason my use of IM clients is very limited:

“Unfortunately, both program’s installers are as pushy as ever about adding browser toolbars, loading extra start-up software, and changing your home-page and Web-search preferences; choose custom-install to opt out of those intrusions.”

I call this the Real Player Syndrome. It’s the genesis of my intense dislike of everything Real- well, that and the fact they make you call them to unsubscribe to things you subscribed to online.

In the race to add features, the IM applications have become bloated caricatures of their former selves. People don’t want to use IM applications as browser-substitutes. They just want to be able to chat with other people, without network limitations.

And what about AOL? Rob says that AOL may be tiptoeing in the right direction:

“AOL is no longer reflexively hostile to letting outsiders hook into its system, having stopped trying to block AIM-compatible third-party software. But the company has only tiptoed toward interoperability, opening its network strictly to far smaller competitors. For instance, users of Apple’s .Mac service have been able to tie into AIM since 2002, and AOL says that by the end of the year, the Google Talk network will also connect to AIM.”

It’s a risky business for the IM applications with the biggest market share to knock down the walls and allow cross-network communication. But it’s inevitable and it will happen.

There’s a crack in the wall. Let’s sit back and watch it grow.

I have to agree with Dave Winer when it comes to Kevin Rose’s response to Jason Calacanis’s latest P.T. Barnum maneuver.

Let me get it out of the way by saying that I think the idea of paying a bunch of people to social bookmark on Netscape (I still can’t believe they’re using that name) is nutty. Of course starting a blog network is also nutty and Jason made a ton of money by doing that- so he may be nutty like a fox.

Back to Dave and Kevin.

Kevin says:

“[U]sers like Digg, Del.icio.us, Reddit and Flickr because they are contributing to true, free, democratic social platforms devoid of monetary motivations. All users on these sites are treated equally, there aren’t anchors, navigators, explorers, opera-ers, or editors.”

To which Dave correctly points out:

“No doubt Kevin is going to make something like $20 or $30 million when he sells Digg, which seems a pretty likely outcome. What will the users get? It’s a bit awkward for him to claim they do it for love if he himself doesn’t do it for love.”

Clearly there is a “monetary motivation” to Digg, or else the very monetarily motivated VC community would not be funding Digg to the tune of at least $2.8M.

But the problem comes from perception, and the shift therein when what starts out as a labor of love is transformed into a potentially lucrative business.

I have faced the same sort of scrutiny Kevin is under now, albeit on a smaller scale. When I started ACCBoards.Com back in the nineties, it was a labor of love- at first. Then it became the most popular ACC Sports site on the net, and started costing me thousands of dollars a month in server and bandwidth charges. I needed someone to help pay those expenses, so I went out and made content deals with Jefferson Pilot Sports and Cox Media. Before I knew it, my little web site was being talked about during college football games and on SportsCenter. Eventually, after paying costs out of my own pocket to create, develop and operate the site, revenue generated by my content deals and advertising put me into the black. Way into the black, actually.

Then came the offers. I resisted them for years, until I got nervous about Bubble 1.0 and the ability of ad dollars to become infinite (now you see where that recurring theme of mine came from). I signed a deal to sell the site for many, many dollars and much non-dilutable stock- go home money. Bubble 1.0 popped about 6 months too soon, and the sale didn’t close.

When things started moving from Kent pays thousands a month to Kent makes thousands a month, a lot of my moderators (volunteers who managed the various message boards) began to ask me the same sort of questions Kevin gets asked now. I tried to answer the questions fairly- I did not play the “but you do it for love” card. Many of my moderators were satisfied, and some of them are still moderating the boards today. But many others decided to jump ship and compete with me, thinking that it was easy money. Some of them were successful and some weren’t. But all of them learned that to become successful, you have to work very hard for a very long time and, unless you get some greater fool/VC money, at your expense.

A huge part of Web 2.0 is based on monetizing user-generated content. Digg is no different from Myspace and YouTube in that regard. In fact, even old media makes money by user generated ad sales. That’s just the way things work.

I don’t buy Kevin’s argument about his users doing it for love, but I also know that it’s really hard to say “well, I had the idea first and I got here first, and that’s just how the world works.”

But that is how the world works.

The latest IM numbers are out and, as I mentioned the other day, the numbers for Google Talk are bad- in fact they are worse than I thought.

Almost a year after its release amid a buzzing blogosphere, Google Talk has captured a mere 1% of the IM market share. But for constant CPR at the hands of cousin Gmail, one of Google’s few successful non-search applications, Google Talk would have almost certainly faded into complete oblivion.

Mike Arrington asked the first question that popped into my head when he wondered where Skype IM falls on the list. According to Business Week, Google Talk is the 10th most (un)popular IM application, so there are at least 6 other applications ahead of it.

The problem, as I pointed out almost a year ago, is that historically the IM clients don’t talk to each other, so people have to go where the numbers are- and they aren’t at Google Talk. As the walls come down and more of these clients are allowed to communicate with each other, features will matter more and Google Talk will be in last place for a different reason- because it likely won’t be invited to the party in time to make a difference.

The Microsoft/Yahoo deal to allow their IM clients to communicate with each other was designed to knock former leader AOL down a few more notches and to nip Google Talk’s growth in the bud.

For all these reasons, Google Talk is on the outside looking in.