- Posted by Tengku Zahasman on July 29th, 2007 filed in Entrepreneurship, Web2.0, Business Model
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A lot of people will be wondering the same thing the first time they hear about building businesses around Web 2.0, “After creating a Web App.. what happens next? How do we generate money out of it?”
Its nothing complex, really. As long as you can build an interesting or useful app, there comes the quality traffic. Quality traffic always comes with quality users. And when there are quality users, guess what? There’s money… lots of `em too. Look at Friendster and Myspace. Their founders are now millionaires.. how do you think they pull money out of those apps?
You need to have some kind of business model before you build that app… or at least an idea of how to generate money out of it
We’re all in the business of making money here. Depending on what type of services your web application offer, there can be many different ways to monetize it. A lot of these have been practiced in the offline business world for ages, but the fact that we’re doing it “the web way” makes some new people in this industry a bit confused.
1. SUBSCRIPTION BASED MODEL
This is one of the widely used business model in the industry of Web 2.0, specifically for those web apps that provide “uniquely” useful services and don’t have so many scary competitors. Usually those that uses this approach will also provide FREE subscription plan but with limited functionalities. This strategy is implemented just so that the users will be able to try out their services before deciding later on whether they want to upgrade to a paid subscription if they need the extra functionalities. Some people upgrade because they want to remove ads and other types of annoyances in their account. According to Ryan Carson, in most cases 98% of the users will be on the FREE plan and only 1-2% will actually upgrade. However, if you have a REALLY huge user base, 1-2% may actually be worth it. Basecamp, Freshbooks, DropSend and Shoutmix (a Malaysian shoutbox provider) are some of the famous Web 2.0 startups that uses this approach.
2. ADVERTISING MODEL
Reserve some space on your web app for advertisers to put their advertisements on. This can be done in many creative ways depending on your application’s behavior and not necessarily just by putting banner ads on the webpage. Take for example Revver, an alternative online video sharing service like YouTube. They append short video advertisements at the end of each uploaded videos. Some widget-based web companies will put small ads on their widgets too. Feedburner allows putting ads in their user’s RSS feeds. This type of business model is mostly used by apps that has massive amount of target audience or users. Most of them usually provide absolutely FREE service/accounts to attract that number of traffic.
3. SELL STUFFS ONLINE..
Although selling stuffs sounds a bit traditional but it still is very practical and web2.0-ish if you do it the right way. Check out CafePress for instance… the company that actually allows you to design t-shirts online (and also caps, mugs, etc), and buy it without any minimum order. To make it better, they would even allow you to open up your own e-store with those designs you just created and get commissions out of it, shippings handled 100% by them. Isn’t that idea just plain brilliant? I think I should create an app like that someday…
4. REVENUE SHARING MODEL
This is also a type of “advertising model” with the exception that instead of taking all the advertisement revenues for yourself, you also share a few percentage of it with your users who help spread the ads across the web. Such examples are Google AdSense, PayPerPost, Text-Link-Ads, Advertlets and ImageFly. By giving some percentage to your users, you’ll instantly create the buzz and attract lots of participants very quickly. This will exponentially increase your advertising network and thus giving you the extra credibility to attract bigger advertisers. This is a business model with a marketing influence injected to it. The disadvantage about this approach however is that keeping up with your publisher’s payouts could be very troublesome and time consuming. You need to constantly make your publishers happy cuz one mistake might get you into lots of trouble in terms of reputation.
5. REVENUE THROUGH PPC PROGRAMS
PPC stands for Pay-Per-Click. This is one of the easiet way to generate money out of your web app because you only need to place some non-intrusive ads around your application and get paid for every valid clicks made on those ads. It can actually be implemented in almost any web app of any types and combined with other main business models. Google AdSense, Yahoo Publisher Network (YPN) and Bidvertiser are some of the PPC programs out there widely used by many apps to generate revenues. Example apps that uses this monetization method are Friendster and Flickr. Possibly worth it for high traffic apps.
6. SELL YOUR WEB APP
A lot of web startups out there dreams of getting acquired or bought off by the giant web companies out there like Yahoo and Google. While this is not really a business model, it does give you the monster-bucks (we’re talking [b][m]illions here ppl ) very quickly. Basically it is selling off your business so that you can stop managing your web app and just enjoy the money. Few months ago YouTube and Feedburner was sold off to Google for about 1.65 billion and a hundred million bucks respectively. Now their founders are living in heaven. You need to be very good in statistics to attract these buyers tho, because you need to prove to them giants that your app is really worth that much.
OTHER MODELS.. THINK.. THINK..
I can’t possibly list all business models here. What I have stated up there are some of the major business models used by many Web 2.0 companies. Companies like Paypal and E-Gold for example have their own business model on the base of electronic-currencies which I haven’t yet stated in the 6 points above. Ebay, Amazon and Alibaba also have their own unique business models. The point is that by being a little bit creative, you can turn money out of almost any ideas you can think of. The most important part now is to start building upon that idea!Tags: business model ideas internet business internet startups web 2.0 Web 2.0 entrepreneur
- Posted by Tengku Zahasman on May 4th, 2007 filed in Web App Development, Web2.0
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Forget about creating another Netvibes or Meebo. Leave the complexity of such development to the bigger players unless you also have some very very experienced developers to back you up. For a start, focus on simple ideas. Ideas that a normal person like you and me are able to think inside out. Ideas that the end-users can easily “get it”. Ideas that can even make your mom nod when you try to explain to her about your project. Afterall, it has been proven many times that simple web applications can really make it big in the Web2.0 arena - and complex Web2.0 applications does not necessarily mean they’ll be a success. Think about Twitter. It started off with a very simple idea which stemmed up from one of the very basic questions in life: “What are you doing?” From that idea, they created a community around it. They created widgets out of it. And all of a sudden Twitter becomes a trend.
Or perhaps look at how just a simple online to-do list can have so many users praising it. Or an online project management app that is used by many big time project managers. How about Technorati (blog search engine)? Feedburner (feed manager)? MyBlogLog (visitor tracking)? All these applications proved that we don’t need to think too much about creating an application that does so many different things. A good application should focus on doing only one specific thing, and being especially good doing it. Most users love simplistic, focused applications. And that is what we should craft our ideas upon. There is a saying that goes: “Great things often start with a simple idea”. I believe in it..Tags: ideas internet business internet startups web 2.0 web application