Web 2.0 and the search for a business model

Interesting post on Centre Networks on Web 2.0 business models in comparison to Web 1.0.

I think the post – and subsequent conversation – leaves out one more important business model: selling their cool technology to one of the big services. (It’s a perfectly reasonable business model – in a sense it’s what the biotech companies have been doing for big pharma for the past few years.)

The path is well-trodden: cool software freely available gets massive traction and a very good press; tech giants buys them to plug a functionality hole. There are numerous examples: Postini (Google secure corporate email), Groove Networks (collaboration for Microsoft), Writely (now Google Docs) … the list goes on.

Maybe this is an avenue that will close off a bit in the downturn (thought maybe not) but it goes some way to explaining why Web 2.0 companies have sometimes focussed less on business models and more on scale and user acceptance.

So, to the problem of what the Web 2.0 companies should do now?

Companies like LinkedIn who have had a long time in the game (it was founded in 2003 making it a real veteran!) have often had longer to experiment with business models. LinkedIn early on worked out that recruiters would pay for access to the pool of 34 million business people profiles and has moved on from there to build a compelling advertising proposition based on the enormously detailed demographics which are a by-product of the service.

Twitter, to take an interesting example from the … post, is in a different position. The growth (and influence) of Twitter has been notable (yesterday the service even got a mention on the BBC News at Ten!) but as yet there is no discernable business model. I suspect, with 25 employees and a growing, and very demanding user base (fail whale = uproar) there is a human bandwidth problem when it comes to business strategy, especially in an environment where VC money is forthcoming, and the ultimate option of selling out is still there.

That may have all changed now, so my advice is: hire a couple of smart people to work up some commercial options which add revenue without sacrificing the utility and increasing network momentum of the service. Here are a few starting points:

  • offer a Pro options for the prolific and earlier adopters – Guy Kawasaki surely would pay a few bucks for a special symbol against his name and some premium benefits?
  • consider the options for secure sub-networks in corporations – as the service goes mainstream corporates are looking to use microblogging services but Twitter has the advantage of network size
  • consider how to use the date from the network to build a metrics business
  • …and so on

I am sure there will be a big fall-out in the Web 2.0 world, but I’m also sure that what we are seeing now is just another phase of the incredible development of the web. After all, after the last big bubble burst, the companies that survived have in many cases gone on to weave themselves into the fabric of out lives – think Amazon and Salesforce.com.

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