Web 2.0 Business Models

This is a comment from Michael Eisenberg blog sixkidsandafulltimejob.blogspot.com. I am very much impressed with the bravity of the comment. he is spot on.

“I am just back from a “cool web 2.0” IDB event (see http://www.ibdnetwork.com/index.php?option=content&task=view&id=156) Many companies presented, and the most common question from the panelists was “what is your business model”. The ubiquitous response was “premium services and advertising” (PS&A). The audience did not buy this – at some point, when yet another cool web 2.0 entrepreneur responded PS&A, many in the audience actually laughed out. Smart crowd, I guess. You need substantial volume on your site in order to derive significant revenue from advertising. Most of these web 2.0 are one feature built around cool technologies – hard to believe they will drive enough traffic to support a substantial business. Premium services are even trickier – you must find an add-on service which is at least as useful as your basic free service. Plaxo, LinkedIn and the like did not figure that one out for years – and may never figure this out.”

And for this comment i find another interesting comment there:
Right now, the internet market is a mess – full of customers who have no money and companies that do little but swallow the industry status quo (make everything free); hook, line and sinker. That said, the picture is more complicated and it may be the nature of the internet market it self that stops people building proper (as in, old fashioned) businesses.

Really, what we’ve just gotta see a proper fragmentation in the supply side of the market. We’ve gotta see companies sell premium quality services at premium prices – rather than having a homogeneous market of suppliers who commoditize each other.

A proper market has to be layered, as delimited by pricing different strategies between discount, at market and premium suppliers.

Of course, it wouldn’t hurt if the majority of consumer internet weren’t pennyless college kids (not that there is anything with that).

Now, on the contrary, trying to move away from marketing free software may be more of a problem that first seems. Basically, why on Earth should I try to build a real business (i.e. sell something) if in 12 months, what ever I am selling is gonna be technologically obsolete….

I think who ever imagines that any internet startup existing today will survive for even the next 5 years must be kidding them selves. After all, this is the software business and innovation around here happens a lot faster than I can restructure my product line.So what do I do if I just don’t have the time to grow organically, charge through the roof and build sales teams etc….?Well…that’s what happens, I take the next best option, do a bit of gambling and spell it out and clear that my business model is rolling dice in the hope of capital gains.

I know, sounds crazy….but is it really?


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