It is foolish to blame startups for this. Non-business consumers will not, with extremely rare exception, pay for anything online. There will always be another startup that will be willing to give your product away for free if it's successful. So what does suck? Consumers.
Also, the iphone doesn't really have much to do with the "web"...
"There will always be another startup that will be willing to give your product away for free"
If you're product is so easy to copy that another company will be able to give customer the exact your product for free, then yes - lame startups are to blame. Gimp has been "giving Photoshop away" for years but it doesn't stop Adobe from charging $600 for it.
How can you blame customers for not willing to pay you for what you've made? Imagine General Motors blaming Americans for not buying enough Silverados in their quarterly earnings report.
Business models employed by most "Web 2.0" startups are old. They're nothing but electronic versions of magazines. There have always been subscription-based periodicals, 100% ad-supported publications and many more in between. People always paid for the good stuff.
The problem is: that there is "nothing to read", and of course there isn't, since most startups aren't solving the problem of "creating". Instead everybody is into sharing, discovering, aggregating.
Just imagine a news stand with hundreds of magazines that have short snippets of actual articles from another magazines, claiming that their "content" is pre-filtered to fit your preferences by thousands of editors.
Everyone does steal photoshop except for when it is for business related use. So you have not invalidated my point.
Again, don't compare non-web products to web based. It is vastly different.
Yes it is perfectly fine to blame the normal customer for what he wants and what he is willing to pay. I myself have very different tastes than the normal customer. At least faulting the customer makes more sense than blaming the startups that are just doing what makes the most money. The consumers can change their mind about what companies they will make successful but the companies cannot change what the customers desire.
No real exit is based around the "magazine business model".
> At least faulting the customer makes more sense than blaming the startups that are just doing what makes the most money.
The whole idea that you should blame anyone for a startup doing something that makes money is thoroughly pointless. There's nothing to blame anyone for.
If you start up a business and you make money, then, in general, you have achieved the goal of starting a business. Who cares if it's making vampire widgets on Facebook or a social network for shortstops? If you're making money you can laugh at critics all the way to the bank.
Again, don't compare non-web products to web based. It is vastly different.
No they aren't. Flickr Pro, Quicken, Mac OSX and the toaster in my kitchen are all exactly the same: I saw them, liked them and paid money to get them.
Stop thinking that you're different. First, you aren't. Second, it's not healthy.
Well, don't build easily reproducible shit then. Become a Photoshop, not Gimp. There isn't anything "as good in every way" as Flickr. And if you give me a crappy toaster as a gift, I'll throw it away and pay for a better one.
I don't understand why "web 2.0" entrepreneurs think they're different. I can imagine it may be hard for many to accept that what they do isn't worth a dime in consumers' eyes. Accept it and move on - build something with value, and do it better than the next guy.
Also, the iphone doesn't really have much to do with the "web"...