Web 2.0 Fails to Produce Cash

The Financial Times has an interesting article about how Web 2.0 startups have so far managed to generate a lot of buzz and behavior changes, but thus far very little in the way of actual cash.  This has been a constant wonderment to me for a long time, as it seems that people are looking for cool things and assuming it’ll make money somehow down the road.  Like Twitter.

The shortage of revenue among social networks, blogs and other “social
media” sites that put user-generated content and communications at
their core has persisted despite more than four years of
experimentation aimed at turning such sites into money-makers. Together
with the US economic downturn and a shortage of initial public
offerings, the failure has damped the mood in internet start-up circles.

Don’t get me wrong, I love many of the sites, and several of them I would actually pay money for if they asked.  But others I suspect will either be abandoned completely or scaled way the hell down.  Twitter is cool and all, but it really should be either open source or it should be somebody taking donations to do it.  Eh, I know I’m probably the only who thinks this, but it just doesn’t add much value to me–it’s more a diversion than anything.  (I’d be interested to hear if anyone out there would actually be willing to pay for Twitter?)  Maybe they could actually charge people to use it now that it has this many users, but I’d bet half their users would leave instantly. 

Kedrosky_advertising_1

Advertising is getting to be pointless, it’s so in your face on every Web site that people are numb to it.  It’s also the lazy way out, where you add so little value to your users that the only way you can conceive to get money out of the interaction is to take advantage of the fact that they won’t walk away from you.  It’s like a street performer who juggles advertisements or something.

“If you look at some of the valuations, you wonder what fantasy of
revenues they’re based on,” said Mitchell Kertzman, a partner at
Silicon Valley venture capital firm Hummer Winblad.

Agreed.  With the economy screeching to a halt, these companies will need to start making real money, real fast.  The VC money will dry up.  They must either produce real value and get paid for it or take their ball and go home.  It will be interesting to see if the last few years are later seen as one big industry-wide "try before you buy" period.

 

(Sorry, I found that hilarious.  I don’t mean to demean your favorite buzzword ;)   Found via Giles Bowkett, so go yell at him if you’re offended :)

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  • http://www.mediaslate.org/ J. Trent Adams

    From the "how should these services get paid" side of things, I'm a fan of micropayments.

    For example, you ask who'd be willing to pay for Twitter. I'd be a interested in some kind of CPM rate for it's use (if it was more stable). To do so at a grand scale for all similar services (e.g. FriendFeed), it'd help to have a centralized place for me to control my micropayments.

    Perhaps your Primary Profile Provider could offer this service. As with attribute exchange in OpenID, I could envision a standardized CPM kind of model whereby a user not only grants access to their profile data, but to a "debit account" from which to draw.

    In this way, services would never see your payment information, but rather only be granted to draw on the account from your Profile Provider. This would allow you to easily sever the micropayment relationship at any time (along with including ceilings and other throttling).

    I smell a business plan…

  • http://eyeline.mobi/blog Ivan Komarov

    Agree! Thanks for the video — FUNNY! I suggest to read the Ponzi game arguments borrowed from Paul Krugman on my blog (eyeline.mobi/blog/2008/05/28/another-bubble/). I am mostly into mobile and am hearing a lot of hype from my sector.

  • http://eastman1.blogspot.com DE

    The micropayments argument is right – in theory. I would certianly pay a cent a day for Twitter. Unfortunately micropaymets seem unfeasible to implement.

    I'm afraid the probable future for Twitter is to become a vanity purchase for a company that wants attention from geeks.

  • http://xmlhacker.com/ M. David Peterson

    Jason Kolb!

    Great article! But why does everyone seem to be overlooking the obvious? > http://www.oreillynet.com/xml/blog/2008/05/dear_twitter_a_simple_solution.html

    BTW… Sent you an email to your @gmail.com account last night. Let me know if you're not monitoring that account on a regular basis.