Naturally, with it being the end of the year, I have been spending some time reflecting on the previous year in order to get idea of where I want the business to go in 2007. As I thought about 2006 a couple of significant standouts came to mind.

The first example that came to mind was MySpace. In 2006 it hit its peak (at least in popularity) by becoming one of the most visited websites on the Internet. I’d say that a site created by one guy which now has traffic levels comparable to MSN and Yahoo is doing something right. And apparently News Corp. thought the same because it purchased MySpace for a few billion dollars.

Or what about the huge the explosive growth and eventual acquisition of YouTube. It went from a pretty cool website to a $1.6 Billion part of the Google machine.

Wouldn’t you like your business to have the same kind of results in 2007 that these businesses experienced in 2006? I know I would. That got me thinking and the one thing that I realized about all these success stories of the past year is that they all seemed to grow exponentially.

So I asked myself, “What caused these businesses to grow so fast?” and without a huge multi-million dollar advertising budget behind them. They did it with a business model and methodolgy that allows its users to help add to and grow the content and community of their business.

The popular name that most have adopted for this model and methodology is “Web 2.0″. And for the purposes of this article, I’m going to stick with that name.

What is Web 2.0? Here are the basic characteristics of a Web 2.0 application or website:

* “Network as platform” — delivering (and allowing users to use) applications entirely through a browser.
* Users owning the data on the site and exercising control over that data.
* An architecture of participation and democracy that encourages users to add value to the application as they use it.
* A rich, interactive, user-friendly interface based on Ajax or similar frameworks.
* Some social-networking aspects.

All of these characteristics are there to allow users to easily contribute to the overall community.

Web 2.0 is not the first example of this type of system thriving in its environment. Take the growth of cell phone networks. They have the same root principals in that they depend on the network to grow(user base) in order for the value of the overall network to increase. To this day, you still see Verizon Wireless commercials advertising that they have the “best” network because they have the largest network. They show it by having a huge mass of people standing there as your “network”.

This is called Metcalfe’s Law, it states:

“The value of a telecommunications network is proportional to the square of the number of users of the system. First formulated by Robert Metcalfe in regard to Ethernet, Metcalfe’s law explains many of the network effects of communication technologies and networks such as the Internet and World Wide Web.”