Thought Garage

How are many of the Web2.0 companies (hoping of) making  money out of their products? Quick and honest answer is : ‘Nobody knows for sure, including the companies’. And predominantly there is only one business model: a free service and place ads on the pages.

Here is nice study on current Web2.0 business models, from VTT – Technical Research Centre of Finland : PDF File

Social media is becoming more and more attractive to Web users. However, the majority of social media services do not have a clear business model. Typically an innovative idea gives birth to a service, which people can use free of charge. The most common way to create revenue is via advertisements: Google ads appear in many services. In the long run, however, social media has to adopt alternative means for making money.

Why most web2.0 services are free?

I think, despite the hype in the media, many web2.0 companies (excluding a few) are NOT looked as providing any VALUE to its users. Most of them do not appear to solve  a problem’ or create a ’service’ that users MIGHT need, if not essentially needed at the moment. Evidently there is no conceivable market for revenue. So most of them base their revenue on ‘ads’ placed on webpages. More users checkout what the site is about, more will be the revenue. I don’t think, any reasonable entrepreneur is looking for these visitors to get sticky on their websites. They, most probably,  already know the TRUE value of their service. If they had believed that it is TRULY VALUABLE to users, I guess they would have charged the service based on some kind of subscription model or pay per use.  Why not?

The Litmus Test

I think that every Web2.0 business (I am already excluding enthusiasts’ Web2.0 websites without any business models) should ask the question on what is the VALUE they are bringing to the community. The litmus test will be asking themselves, if they would pay for the service? If they do see VALUE in their service, answer would be a definite YES. 

But..

You might cite 10s of Web2.0 products that are completely FREE but provide a good value and they all generate revenue on Ads (for example most Google products are FREE), you are missing the point. (Google sells Ads and serve them to users) They are many products created that are purely dependent on ‘number of page views’ and there are only a few products that are built to charge for the service. You can choose whatever you want.

Most News Channels are FREE. But NONE of the movie channels are. You pick your market. If I have to pick between YouTube and BaseCamp, I would pick BaseCamp as my Business model. If YouTube start charging how many will use it? You might already know answer to this question when it comes BaseCamp.

If you provide A VALUABLE SERVICE (atleast you believe so), why not charge for it?

Update: Received a few emails explaining whey this FREE model might work for some of them. Just summarizing the view points here:

• If Service is Free, there will be more users tend to try it out and Application gets popular quicker. Once it reaches a critical mass, it can offer Value Added Services at a fee.
• There is no web application that can not be cloned in a fair amount of time. So even if you created a brand new service and charge a premium for the innovation, pretty soon copy cats with similar services offer FREE service and you will run out of your business, if not forced to offer it for FREE. So why not start free.
• In today’s market, FREE not necessarily mean ‘no or less value’. Particularly on the Web, ‘FREE’ has no qualitative meaning. It is always taken for granted.
• It is easy for Entrepreneurs to signup for Google Ads/similar provider than getting the first paid customer. Its FREE even for them to signup.
• Though number of users is not proportional to amount of revenue generated out of ads, Marketing teams from Large organizations favor more user base than a Quality Service with lesser user base. So MASS wins for advertising. In contrary, small businesess focus on niche groups.

I never intend ‘Thought Garage‘ to be a source of information on H1B visas. But regular readers of my blog and frequent visitors made it a prime source of information for H1B visas this year.  One of my colleagues left a message that Thought Garage tops Google search results for H1B 2008 ahead of the most famous immigration portals including Murthy.com. I looked it up on Google and below was the screenshot of the search results.

There is no reason for my blog to appear at the top of Google search results for information regarding H1B visas, without your turning to my blog to get the updates and sharing your experiences for the benefit of other guests. I understand for some of you, getting a H1B and working in US will be a turning point in your careers and I am quite thrilled that you considered Thought Garage as one of your sources of information. 

Thank you all.

I could not answer all questions asked by you on posts concerned with H1B 2008 Visa process, particularly certain legal aspects.  But I am sure that I shared my experiences that might provide you with some pointers. When I get some time, I will post all questions I received in emails as a blog post so that all other readers can benefit from our discussions.

I understand that still quite a few of aspirants are waiting for their final confirmation on their petitions,  I wish all of you All the Best. I will post any updates as and when available.

Thank you very much.

One of my colleagues forwarded this amazing Cat fish (real) story. Read on.

Fish Story

A guy who lives at Lake Conroe (50 miles north of Houston ) saw a ball bouncing around kind of strangely in the lake and went to investigate.

It turned out to be a flathead catfish who had obviously tried to swallow a basketball which became stuck in its mouth!!

The fish was totally exhausted from trying to dive, but unable to because the ball would always bring him back up to the surface. The guy tried numerous times to get the ball out, but was unsuccessful. He finally had his wife cut the ball in order to deflate it and release the hungry catfish  You probably wouldn’t have believed this,
if you hadn’t seen the following pictures..

Seth Godin shares about his recent visit to Indian Consulate in Newyork and its bizarre state of affairs. Thats not a big surprise for me and fellow Indians who have been living through it for years. But it is quite interesting to read his fresh suggestions to treat it just like a business and leverage the unique opportunity and maximize benefits. He argues that problem is not lack of ideas to change but lack of a mindset to do so.

The problem is that this bureaucracy, like most bureaucracies, has an attitude of minimizing, not maximizing. They want to minimize expense, not maximize benefit. There isn’t a single person there who has as part of his job, “change systems to increase the satisfaction of people we deal with.” Nobody who is charged with, “increase revenue opportunities for us and for the people we work with.” Or even, “employ more people in Delhi.”

Same thing happens at my village zoning board, at most schools, at many churches and even, believe it or not, at most businesses. It’s not that difficult, but it requires a very different mindset.

Source: Seth’s Blog: Even governments market

Traditional wisdom says, to maximize your profits, spend your energy on minimizing the waste. It looks so reasonable and seems to make sense to ‘almost‘ everybody. And may be, then, that also explains the fact that  only 1% of people control over 90% of wealth and prosperity, in any part of the world.

I remember attending a series of Financial Education brown bag sessions, called ‘Wi$eup’  at my workplace an hour a week for about 8 weeks. The sessions are full of how cutting down one Starbuck coffee a day can take you to Disneyland and how cutting down on your daily expenses make you a rich person. At first it looks reasonable and logical and true in concept. But think about it. Say, if you are an employee making 100K gross a year and want to make a Million dollars in say 10 years, how long would it take you by cutting down a coffee a day and opting for car pools. I tend to believe, it requires a totally different mindset to come out of this ‘Saving and cutdown’ ratrace and start making MORE money and invest wise. 

There is a reason if we go to any bookstore, we will find 100s of books that are trying to help us becoming Rich or more productive by 1000s of tips on ‘Saving’, not necessarily on INVESTING.

Traditional wisdom ‘traditionally’ sells a lot.

Number of Camera Phone owners in US climbed to 106 Million in United States as per a press release by M:Metrics accounting to around 51% of total cell phone owners. So one in two have a phone equipped with camera.

In terms of % of subscribers, US is still behind Europe where as high as 75% of cell phone owners have a phone equipped with a Camera.

Source: M:Metrics, Inc., Copyright © 2007. Survey of mobile subscribers. Data based on three-month moving average for period ending 28 February 2007, n= 102,267 mobile subscribers in France, Germany, Italy, Spain, the UK and US.