Successful Web 2.0 business models
I have been thinking about web 2.0 business models over the last few weeks and it occurred to me that there was a dearth of even anecdotal evidence pointing to successful business model implementations of web 2.0. My question is, which firms are operating in profit with a web 2.0 business model right now. Note I am not including those who have successfully sold out to larger players, I am confining my query to effective web 2.0 business model implementations, ones with ongoing profitability (sustainable). The only ones I could think of (off the top of my head) was 37 Signals and maybe EchoSign, thus I put it to you who can you add to this list, is there such thing as a successful web 2.0 ongoing business model, or am I asking the wrong question?
Re: Successful Web 2.0 business models
Depending on what you mean by Web 2.0, you might say Google.
I guess the issue is that most web 2.0 services are, as is often pointed out, features not businesses. So selling the company (and your audience) to a larger business may be the natural way to get paid.
What, I think, may change that, is the rise of the Facebook Platform and widgets in general. A feature which lives, isolated, on its own web-site may have trouble getting enough users to go and try it out and use it.
But a feature which is packaged into a micro-application in Facebook can probably be smaller and lighter (read cheaper) to produce, but propel itself to a large audience more rapidly via Facebook's social network. As it seems it's now possible to sell ads within apps, this may recallibrate the equation a bit.
I guess the issue is that most web 2.0 services are, as is often pointed out, features not businesses. So selling the company (and your audience) to a larger business may be the natural way to get paid.
What, I think, may change that, is the rise of the Facebook Platform and widgets in general. A feature which lives, isolated, on its own web-site may have trouble getting enough users to go and try it out and use it.
But a feature which is packaged into a micro-application in Facebook can probably be smaller and lighter (read cheaper) to produce, but propel itself to a large audience more rapidly via Facebook's social network. As it seems it's now possible to sell ads within apps, this may recallibrate the equation a bit.
Re: Successful Web 2.0 business models
Depending on what you mean by Web 2.0, you might say Google.
I'm not sure Google would count as they don't really have revenue from web 2.0 products, rather their revenue is from their web 1.0 product search/advertising. There newer web apps for example barely register in their revenue statements.
I guess the issue is that most web 2.0 services are, as is often pointed out, features not businesses. So selling the company (and your audience) to a larger business may be the natural way to get paid.
This may well be confirmation of my own suspicions, many are just features rather than products and thus difficult to monetize in a profitable manner.
But a feature which is packaged into a micro-application in Facebook can probably be smaller and lighter (read cheaper) to produce, but propel itself to a large audience more rapidly via Facebook's social network. As it seems it's now possible to sell ads within apps, this may recallibrate the equation a bit.
Although the FB model has built in viral adoptance, monetization on someone else's platform is very high risk. It is also more geared towards being bought out by the platform owner (or even just copied). Thus I have difficulty seeing the real business model (sustainable and profitable) emerging on FB, apart from Facebook themselves of course.
This seems to point to a real weakness in web 2.0 business models, it is difficult to find examples that buck the trend. Maybe web 2.0 business models are actually business models but business model features ;)
Re: Successful Web 2.0 business models
Well, it does depend how you characterize web 2.0 I'd say that the way that PageRank uses the link-information of *external* sites is quite web 2.0 in spirit.
I understand the issue about the danger of being on a proprietary platform and the risk of having it pulled out from under you. But isn't this something that every generation of software development faces and has to negotiate? Historically developers have built businesses while struggling with Microsoft and Apple and other platform vendors. It's preferable to be on the web platform-without-a-vendor, but that's been the exception rather than the rule.
Still, this is a great question about profitable web 2.0 business models.
Skype, maybe? (I know they got bought, but weren't they profitable before then?)
I understand the issue about the danger of being on a proprietary platform and the risk of having it pulled out from under you. But isn't this something that every generation of software development faces and has to negotiate? Historically developers have built businesses while struggling with Microsoft and Apple and other platform vendors. It's preferable to be on the web platform-without-a-vendor, but that's been the exception rather than the rule.
Still, this is a great question about profitable web 2.0 business models.
Skype, maybe? (I know they got bought, but weren't they profitable before then?)
Re: Successful Web 2.0 business models
I'm going to be cynical here, and compare "web 2.0" efforts to everything else in society, with the keyword being "disposability". I'm thinking music mainly, but that just leaps into my head. How many bands these days get a number 1 album and vast amounts of media coverage, only to be barely heard of when their second album hits? I could reel off a couple of dozen who had their month's worth of fame only to be probably playing pub gigs in penzance these days.
The point is, at some moment in time, marketers realised that people didn't just want to communicate with each other. They wanted to tell their friend how cool they were, and what new thing they'd discovered. Popularity - status - became currency. Social networking is a way of making money off that, like credit card companies makes money off people spending cash.
But this is the bind that web 2.0 stuff finds itself in. Each is vying to be the credit card company, without realising that it's the band. In trying to be "the next big thing", each just becomes something for people to discover, and to recommend. Meta-recommend, I guess. But once that happens, the vicious circle kicks in and the race is on to find the next cool web 2.0 app. In reality, the credit card equivalent is probably the ISP, or the web standards "war". Google/Yahoo/MSN are in between the two I think, by buying up the "next big thing" - they're the record labels of the on-line world.
So that's how I see it - web 2.0 suffers because it's a "culture of innovation", and efforts to build on top of people's viral psychology are doomed to be eaten recursively. Of course, you could say that this is a form of "creative destruction" - web 2.0 on the whole might be stronger. But that just assumes that whatever's the big thing at the moment is "best", in an evolutionary sense. It doesn't take into account what it means to be involved in something over a long time though. Is there something to be said for consistency, or are we doomed to just jumping from one network to another, and one fragmented community to another?
The point is, at some moment in time, marketers realised that people didn't just want to communicate with each other. They wanted to tell their friend how cool they were, and what new thing they'd discovered. Popularity - status - became currency. Social networking is a way of making money off that, like credit card companies makes money off people spending cash.
But this is the bind that web 2.0 stuff finds itself in. Each is vying to be the credit card company, without realising that it's the band. In trying to be "the next big thing", each just becomes something for people to discover, and to recommend. Meta-recommend, I guess. But once that happens, the vicious circle kicks in and the race is on to find the next cool web 2.0 app. In reality, the credit card equivalent is probably the ISP, or the web standards "war". Google/Yahoo/MSN are in between the two I think, by buying up the "next big thing" - they're the record labels of the on-line world.
So that's how I see it - web 2.0 suffers because it's a "culture of innovation", and efforts to build on top of people's viral psychology are doomed to be eaten recursively. Of course, you could say that this is a form of "creative destruction" - web 2.0 on the whole might be stronger. But that just assumes that whatever's the big thing at the moment is "best", in an evolutionary sense. It doesn't take into account what it means to be involved in something over a long time though. Is there something to be said for consistency, or are we doomed to just jumping from one network to another, and one fragmented community to another?
Re: Successful Web 2.0 business models
Hmm Scribe, thats fascinating, So web 2.0 is a birthing pool for new features and social currency. It also suggests that business models are in many cases irrelevant unless they emerge (being secondary consideration). The picture you paint is one of a long tail playground for digerati/geekerati, almost experimental, funded by intense personal investment in time and rewarded by attention from the migrating social geeks. Of course this also indicates the pointlessness of my pursuit (and posed question) and cynically paints a bleak picture for those few that hope for business model success.
I guess build to flip thus becomes the norm, however it doesn't appear sustainable in the long term, fatigue from the digital playground kids could easily kick in, interest could fade and the era ends in a slow decay. That would indicate something transitory rather than innovative in any business model sense i.e. no Business 2.0, maybe even no Enterprise 2.0 of course, just a bunch of new features and the social remnants still attached to them.
I do hope there is more than that, where the positive comments, anyone wish to counter?
I guess build to flip thus becomes the norm, however it doesn't appear sustainable in the long term, fatigue from the digital playground kids could easily kick in, interest could fade and the era ends in a slow decay. That would indicate something transitory rather than innovative in any business model sense i.e. no Business 2.0, maybe even no Enterprise 2.0 of course, just a bunch of new features and the social remnants still attached to them.
I do hope there is more than that, where the positive comments, anyone wish to counter?
Re: Successful Web 2.0 business models
I like John Hagel and his line about there being a push for companies to "unbundle" into three different kinds of specialist business : infrastructure management, customer relationship management, and product innovation.
One way to see the ''build to flip'' companies is really a business model for "product innovation" - specialists who invent stuff but can't do the other things necessary to get them in front of customers.
I suppose if there was a market for selling the product, as opposed to the company, this would be more explicit. Web 2.0 development would look more like the video game industry or Hollywood (or, indeed, the music biz.) with small, creative design studios producing ideas and features that will be brought to the public via the large distributors. (Perhaps Obvious with their selling of Odeo, and maybe Twitter at some point, are moving in this direction.)
One way to see the ''build to flip'' companies is really a business model for "product innovation" - specialists who invent stuff but can't do the other things necessary to get them in front of customers.
I suppose if there was a market for selling the product, as opposed to the company, this would be more explicit. Web 2.0 development would look more like the video game industry or Hollywood (or, indeed, the music biz.) with small, creative design studios producing ideas and features that will be brought to the public via the large distributors. (Perhaps Obvious with their selling of Odeo, and maybe Twitter at some point, are moving in this direction.)