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These new companies have a few ways to subsist, typically advertising, charging extra for "premium" services, and collecting affiliate fees for driving shoppers to sites like Amazon. But ask a Web 2.0 CEO about his company's business model, and he's as likely as not to say "contextual advertising." The advertising model, usually through Google's AdWords program, seems to be the most common gambit. It's the planned or existing main revenue source for dozens of Web 2.0 startups, such as new photo-sharing site Riya, which plans to display ads related to the subjects in its users' photographs.
But consultant Clavier and others say that early-stage companies should see AdWords as a minor, transitional revenue source. "There's nothing wrong with being ad-supported, but you can't assume that AdWords will get you all the way to building a big company," says Clavier.
Companies can survive the Web 2.0 boom, Ali says, by doing one of two things. They can attract the interest of larger companies, who buy a technology and bring in its developers rather than developing their own version. Flickr, Delicious, WebJay, Konfabulator, and Upcoming, for instance, have all been acquired by Yahoo. Or else startups must acquire so many users that they gain an insurmountable lead over competitors, as YouTube seems likely to do in the video downloading market. Or they can do both, of course, like MySpace, which has more than 50 million users and was purchased in July 2005 by Rupert Murdoch's News Corp.
But others argue that even the less successful Web 2.0 companies will be able to survive on their current revenue sources -- mainly because they have simple needs. "The vast majority of these companies do not need revenue -- because they don't have any expenses," says Seth Godin, a Web marketing strategist and author of the widely read Permission Marketing. "The people are doing it for love or in their spare time."
Three months ago Godin launched his own Web 2.0 company, Squidoo, a kind of "citizen's Web directory," where experts in areas from video blogging to vegetarianism publish "lenses," or guides to the best related content on the Web. Squidoo earns money through a combination of Google AdWords ads and Amazon affiliate fees: it advertises links to items on Amazon or eBay and is paid a commission whenever a click on one of the links leads to a purchase.
The company splits these affiliate commissions, and most of the subject experts ("lensmasters") donate their take directly to charity, Godin says. "Most Squidoo lensmasters aren't in it for the money."
Not surprisingly, Godin is a dissenting voice in the chorus of experts predicting a mini-crash. But he does acknowledge that some Web 2.0 companies will fall by the wayside. "I don't think we're going to see the shakeout we saw at the end of the other bubble, because there are different rules now. But I believe that some of these companies have delusions of grandeur in terms of how big and how profitable they are going to get," he says. "You can't have 30 profitable companies in a business where only two can be moneymakers."
Google's App Engine is the latest service to reduce operating costs for Web startups.
Eventful, a grassroots website that began by drawing musicians to small markets, has trained its sights on politicians.
Guest (Wade Roush)
Thanks for the correction, Ben
Doh! I knew that the A in AJAX stands for "asynchronous," and must have been writing too fast yesterday. Noted and corrected.
to Michael Donahoe or any other super techie
The internet is broken.
I'm a TV producer and researcher. I'm super interested in the article THE INTERNET IS BROKEN. I know I'm on the wrong page, but Michael, you seem tech savvy.
Here's what I need, I need heroes, rescuers, IT saviours. I can't go into details but I'm trying to put together a team of specialists to help a media company get rid of this horrific virus (they say it comes from Romania). CNN was infected with it too.
Check HERALD TRIBUNE at: http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20070302/BREAKING/70302006&start=1
"March 02. 2007 12:08PM - Computer virus hits Herald-Tribune
By TODD RUGER
todd.ruger@heraldtribune.com
SARASOTA — A computer virus spreading through business systems this week has hindered several media outlets, including the Sarasota Herald-Tribune.
The newspaper’s production equipment was affected Thursday night, forcing the newspaper to print Friday’s editions without several of its local news, sports and editorial pages. The technical problems also caused papers to be delivered late.
Media reports from across the country show similar problems occurred at a dozen media outlets, including Turner Broadcasting, owner of cable news channel CNN, McClatchy-owned newspapers and the Minneapolis Star-Tribune.
The culprit is the latest version of an old computer virus, RINBOT.L. It is not specifically targeted to attack media outlets, but it cripples Internet and e-mail communications."
Contrary to the journalist, I think it does target mainstream media outlets. It looks like a group of hackers are terrorising the MEDIA by trying to shut it down. We don't see that kind of thing on You Tube.
Anyway, this major media conglomerate is PARALYSED by the virus. IT'S A HUGE PROBLEM.
Please reply if you know who the best IT virus repairperson is. I will forward my email to this person, once that person is found. Just for the record, the media conglomerate has hired the best of the best IT specialists. And it’s still CRIPPLED.
This is a serious question. I will also try to get in touch with David D. Clark but am not sure he's the right person for this problem. We sort of need a special team, sort of a swat team, a guerrilla team made of hackers themselves, engineers, internet architects, internet researchers. etc.
An executive (NOT IN IT) from the company mentioned changing the OS from windows to Mac but somehow I have a feeling it wouldn't solve our problems. Would Linux be a valuable solution Michael?
Anyway, this is a long comment, I’ll give more details and be less confidential if someone replies to me.
Thank you,
Ko (k.ouimet@koandco.tv)
From Montreal and Toronto
PS: I just want to be the go-between. I’ll forward people’s name to IT Director and it’s between you and them. The company is Canadian.
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Guest (Ben Curtis)
Good article, minor correction
The first "A" in AJAX stands for "Asynchronous", and not "Advanced." The technique requires calls to the server, during which your application must not be waiting for the answer -- because it may be delayed or never arrive. Actually, there's very little about Ajax that is advanced, except the browsers which have grown to support a technology invented in 1999.
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Guest (Sacha)
Web 2.0 Business models
Would the mobile evolution help to find alternative business models for Web 2.0 initiatives?
What would be the advantages and disadvantages of positioning SMS as alternative revenue stream instead of 'contextual advertising' for a lot of Web 2.0 business models. Anyone?
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Guest (Michael D. Donahoe)
AJAX
Everyone may be aware of this site, but in case you haven't seen it check out http://www.ajaxwrite.com. It's almost a clone of MS Word that is done in AJAX, also has links to a video editor, Excel clone, etc.
I think there is a pertinet point to be made that there are some amazing strides in the open source community being made. I've recently switched to Linux on my laptop now that applications are getting richer...finally.
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