January 1, 2006
Will Web 2.0 Approaches Build Long-Term Businesses?
So, you come up with this great Web 2.0 approach:
- You Build a web-based service that offers something new and interesting to your web-based audience
- At the right point, you will figure out your economic model, but you can always monetize your traffic with advertising (you are hoping for higher level subscription services)
- You work hard to build such unique features that you become the purple cow of your product market
- Users start arriving
- More users arrive
- More and more and more users arrive
- At this point you need to take on some funding to build out your data center
- Vijay, the hungry VC, is happy to fund you, as you are showing incredible user growth
- With the funding, you offer even better services, including a shiny new API (to promote mashups and unique user interfaces) and offer enlarged storage (storage is cheap, and your users will “stick” better)
- More and more and more users come
- You turn on your advertising, and it works great…you become profitable within a week!
Everything is going unbelievably well, right?
Then, someone comes up with a killer mashup or rich client that starts steering your users to a different interface without the ability for you to monetize traffic through advertising. In fact, it completely changes the user model. You now have the costs, but the revenue is declining.
Could this scenario happen to your company? Check out the Gmail Drive…