web 2.0 revenue models: oxymoron?
January 7th, 2006 by Jean Sini
I attended a great panel discussion last night, organized by the French American Chamber of Commerce of San Francisco, about web 2.0 (ah, just like Joel I swore I wouldn’t use this term any longer) business models.
Sure, some might consider the juxtaposition an oxymoron, and have been quite vocal about it. But judging by the caliber of the panelists (among others Josh Stein from DFJ, LinkedIn CEO Reid Hoffman, Barnaby Dorfman of A9) and the size of the audience, making sure there are ways to generate revenue from new services is as much a part of the current wave of innovation we’re seeing as are the technologies enabling it. And that’s a good thing.
Expectedly, we didn’t venture far from the usual suspects: premium subscription components to an otherwise free service, and advertising. But interestingly, the consensus is that we start, more clearly, seeing advertising as a continuum, from the plainly undesirable (because mostly untargeted) at one end, to the ultimate form of ad at the other: so focused its audience doesn’t perceive it as an ad any more, and instead perceives it as value. This reminded me of the well known nuit des publivores, a yearly event in France, where tv ads from all over are played non-stop, and all night long, to a sold-out audience of enthusiastic “ad-eaters”, who get to vote on the best ads.
Josh reiterated some of the concerns the venture capital community has been voicing about startups being acquired early by the likes of Google, without ever raising VC money. A trend he sees as on the rise. He mentioned the same weapon Paul Graham highlighted in his recent VC Squeeze essay: let the entrepreneurs partially cash in early.
An interesting question came from the audience: how do you set in motion a business where value to the user is close to nil up to a certain critical mass, then suddenly shoots up as a critical mass is reached? How do you drive your first, say, 50 thousand early adopters to take enough interest to sign up? With the kind of buzz that social computing is getting these days, this sort of step function in user value is not that unusual a scenario (incidentally, it’s not a characteristic exhibited by activeweave’s user value model).
Reid’s take: depending on how many users you need, your business may never fly. Josh had a slightly different view: unbeknownst to many entrepreneurs, it isn’t as expensive as we think to hire the right PR firm to generate enough buzz; it isn’t expensive either to throw in the occasional iPod nano as incentive to register! All agreed that getting techcrunched was a good way to get on the map.