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Wednesday, June 30, 2010

Web 2.0 - where is the money?

I’m an Entrepreneur in Residence (in action really!). I’m keenly interested in the intersection of technology and business. Looking forward to engaging conversations on themes such as technology adoption, technology monetisation, new business models etc.


Past few weeks have been a lot of fun for me. First we had the ideastorm where the sheer volume and enthu levels were overwhelming. Then we had the barcamp Mumbai 2 where the turnout exceeded all our expectations. And then came the launch of CTO blog. The number of comments on Ananth’s post is amazing. All these goes to show that web 2.0/social is very strong right around us.

This is fun but is there money in it?

Theresa Wise, Global Director at Accenture’s Digital Media practice, certainly thinks otherwise.

“There is no evidence that these sites are monetizeable.”

I find it hard to agree with her given actual data. There is certainly money in Myspace - $ 300 Mil of it. Blogs make money - not all but some do. The best Indian example is that of Amit Agrawal who makes a decent amount of money - all by just blogging. Also, I can post content on Youtube and get a share of the ad revenue. In spite of the ill founded conclusions, she does raise a valid question: Is there any new business model?

Let’s look at this in a more structured manner. Any web 2.0 site has the following constituents:

1. Platform for the interaction: Orkut, facebook, Blogspot, wordpress, youtube, flickr etc

2. An Author - You are an author when you blog or when you upload to youtube, flickr etc

3. Respondent - You consume the content posted by the author and respond via comments

The dominant business model is to produce content, get eye balls and then sell them to advertisers. A simple model that has been around almost as long as newspapers. It has different variants -

1. Platform keeps all the money - Orkut. Orkut decides what Ads come on which page and makes money from it

2. Author keeps all the money - Blogging world has adopted this model

3. Share between Platform and Author - Youtube has this model. Interestingly, in this case, protests from authors led to sharing of revenue.

Obviously the respondent never makes any money. S/he only spends money with the ISP. This is very interesting since the value lies in the discussion itself and not in just getting people together on a site. The repondent is also adding value but getting no reward. It’s platform first and then author. Its a funny situation for web 2.0 which prides on “participation”. I wonder if other business models have any play here.

Here’s an idea. Just the way we have a Digg button against each post on a blog, why not have a “pay” button against each profile on any Web 2.0 profile? If the post or comment helped me, I can press the button and make a micro-payment - say 10 cents - $ 1.00. This wouldn’t have worked in the early days of web 2.0 where getting people on board was more important. But now that there are many on board and the emphasis is on quality, this may just work.

Think this is new? Then think again. Wikipedia raised money for survival through folks who though wikipedia added value. This is just the same as the idea above except that I’m suggesting a payment infrastructure integrated with web 2.0 rather than as an after thought. Not everyone will pay but then not everyone clicks on Ads either. The clickthrough rate is as low as 1%!

What do you guys say? Will this work?

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