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This blog is about the lives of a few entrepreneurs who are aiming to establish the next trend in social networking and the concept that will make it happen. Since our venture is all about connecting people together, we want to be involved and connected to you and we want you to be involved and connected to us. We'll be sharing with you: who we are, how we got started, how we’re doing and where we’re going...we're taking you along for the ride!!

Sunday, July 29, 2007

Some Web 2.0 Perspective and Food for Thought

My eyes are sore I have spent so many hours online this week reading, researching and further exploring the various communities, blogs and tools that make-up this vast thing we call the Web 2.0. I have come up with some conclusions, which you might or might not agree with and I would certainly love the feedback.

Please note, that I obviously can't mention everything in one post and these observations are kept simple and in broad overviews.

I’m going to start off with my thoughts that I initially shared on Pownce after reading Fred Wilson’s write-up on the Union Square Venture blog about their new investment in Twitter. What fired me up so much about the post was this:

As we stated when we made our investment in Delicious,

The question everyone asks is "What is the business model?" To be completely and totally honest, we don't yet know.

The capital we are investing will go to making Twitter a better, more reliable and robust service. That's what the focus needs to be right now. We'll have plenty of time to figure out the business model and there are many options to choose from.

I was absolutely amazed that millions of dollars would be invested in concepts (Delicious and Twitter) that have no solid revenue models. No solid revenue models equal one thing, a need for real strong exit strategies that probably involve either Google, Yahoo, Microsoft or some other big company coming in for a buy-out. (This of course already happened for Delicious)

This then, also takes me to the ever-so-talked about Facebook. What is Facebook’s real revenue model? We’ll get back to this…first lets cover Ann’s simple view, in simple terms and minus a timeline of the web 2.0 history has it applies to the market (basic people using these tools).

I don’t want to debate if Friendster was the first online community or not, what I think we can all agree on is that MySpace was the first online community to really take off . For the first time in web history people really began to flock to the internet to “check other people out”. Humans are a curious bunch (for information, knowledge and for the sake of being curious)…and MySpace offered a peek into other people lives and an opportunity to “connect” with people you would ordinarily never meet or encounter.

That is the root of what has since then spawned everything else we now utilize and see has part of the Web 2.0. Ultimately, people are getting more and more curious about what other people think, what they are doing, what they are watching and what other people recommend. We call this curiosity communication, the sharing of information, networking and dare some say, real interaction. It’s a beautiful thing, because we are learning more about each other, discovering new things and exploring new territories.

What’s also really obvious, if you spend any time on the web, is that the market (general public) comes into the web 2.0 arena with different levels of knowledge, interest and involvement.

Let’s talk business a little bit. Marc Andreessen wrote a great post on what makes a start-up successful and he drives home the point that in the end—the market will spell success.

When addressing the start of a new business and whether or not the market will support it, the first question should always be: Is there a NEED for my product or service. This question is often overlooked in the Web 2.0 world and instead people think…Wow, this is a really cool application, let me build a business around it.

So let’s talk market, and let’s bring our no income revenue Twitter and weigh it against Pownce.

First off, Pownce has an income model. They are 1) running very discreet and well integrated ads and 2) they have a $20 Pro option.

In regards to the market, here is why I think Pownce will come out a winner on top of Twitter and it’s based on passed history of the market.

Twitter greatly limits your ability to feed people’s curiosity and share information. 140 characters isn’t much and there’s no way to send content other then text. Twitter is much more of a one way street and does not promote user interaction.

Pownce to be perfectly honest reminds me of a chat room and discussion boards. Never really participated in chat rooms in the past, but chat rooms have been around for awhile and have always had huge markets, same with discussion boards. The interchange between people isn’t limited to only 140 characters and text only. People can easily reply to the content that is being shared and the topics span many different areas.

Pownce provides a lot more of what people are looking for…and by people I mean the average person who spends time on the internet.

I don’t think there is a NEED for Pownce, but at least it feeds people’s curiosity in better ways then Twitter, so they have a definite shot at making it. And once you do spend some time on Pownce, you realize, there is something to definitely be gained from taking part in this new community and the sharing of information. Pownce does provide value to their users.

That’s me touching on another critical point about business. If you don’t directly answer a need then do you provide VALUE?

Okay, so back to Facebook. What NEED does Facebook answer? What value does it really provide their users? And who is really driving the expansion of Facebook?

I’m not going to answer the first two questions. Personally, I don’t need Facebook and I haven’t really gotten much value out of it. I do, however, want to discuss what’s driving the expansion of Facebook because I think this will help people think wisely about their future involvement with Facebook.

In my humble opinion, Facebook is NOT being driven by the market (the basic web user and non-web 2.0 businesses), it’s being driven by web 2.0 businesses, entrepreneurs, people and investors. Facebook is an inside job being pushed out to the market.

Will these tactics work? Time will tell. But, if you are basing your success and bottom dollar on making applications and widgets for Facebook (or Twitter for that matter)…I would diversify your business portfolio a little.

Need and value. Keep them in mind as you watch new web 2.0 companies appearing and disappearing. If the business does neither: does not answer a need or provide added value…then, do they feed human curiosity?

Run down the list of successful web 2.0 companies and see what you get…

Oh, here is another question I'd love some feedback on...Is continuously trying to simplify the use of the web 2.o really a need or an added value or are insiders creating this as well?? I do love my RSS feeds!

2 comments:

Ilya @ Neo Meme said...

I'm glad I found your wonderful blog- great post- it shows a realism and lucidity many Web 2.0 entrepreneurs lack.

At some point, we will all awaken from our collective Web 2.0 dream and realize that a business without a revenue model, no matter how popular, is still not a viable business. Most startups nowadays do not fill a need- they are luxury items. However, the lack of a need is not an obstacle for the determined marketer- it's not to difficult to create an artificial need, as MySpace, Facebook, Twitter and all the rest did. As the Internet itself did.

Geoffrey said...

I completely share your pain/frustration. I've been stuck for the last few weeks on completing a presentation about my startup to show to investors. Where I've been stuck has been the business model.

So many traditional VC's and funding outlets require cold, hard details here (http://www.sequoiacap.com/ideas/), its not that I don't understand the proposition, its just that I have no idea what type of revenue to expect when I have no idea of the traffic/buzz that will drive that revenue.

So when reading that you CAN get investment w/o a airtight business model, it makes for a lot of confusion.