[I don’t normally post entries about other people’s blogentries, however this relates to a topic that I’ve meant to coverfor some time.]
Caught an interesting blogentry about Web 2.0 hype via Reddit the other day, and thought itworth a mention. It’s a rather cynical take on the current “Web2.0” phenomenon, noting that many of the recent Web 2.0 sitesand services have no rational current or future business model.
To recycle a rather dated joke–
- Make a really cool AJAX-equipped, streaming-video websitewith das Blinkenlights
- Get lots of visitors and users
This is happening to a scale not seen since the disastrous .COMbubble of 1999-2001, and many of the rising stars of the internetworld seem to exist purely in the hope that Yahoo or Google orMicrosoft will snatch them up for tens of millions in their questfor Internet dominance. Sometimes it reallydoes happen.
Most of us would love to be on the cheque receiving end ofsuch an acquisition.
Being a software developer, entrepreneur, and technologyconsultant, I’ve been in contact with a lot of people who dream ofbranching out on their own, making their own killer softwareapplication or hugely popular web application. They imagine howthey’ll be sitting on the pile of lucre when the Adsense revenueand subscription fees start pouring in, or when the huge buy-outcheque comes in the mail, all while enjoying a reputation as atechnical genius (or, in common media parlance, as an “internetwhiz”).
I offer my support and encouragement for their plans, but temperit with a bit of skepticism. My doubt arises because 9 times out of10, or more like 97 times out of 100, their plan involves–
- Making a killer web application for geeks to hang out. Maybemake subscription levels and members only areas for revenue
- -or- Making cool component libraries for software developers,maybe some cool AJAX-like components
- -or- Making tools for the software development community (bugtracking, process management, etc)
- -or- Making cool web development tools, like an aggregator tomash up all of the Google Maps and Flickr photos with AmazonISBNs
- -or- Something else to cater to the technically adept geekcommunity.
This is what they know, so naturally they want to spin theirobservations and experience directly into business success. Whetherthey’re pro-bloggers, or elite software developers, they feel thatthey know the needs of the market — they know the itches thatneed scratching — not to mention their naturaldesire to earn some credibility among their peer group of geeks anddevelopers.
There are a number of problems with this plan.
- Every other software developer/web app creator is thinking anddoing exactly the same thing: A small market is being grosslyoversupplied by for-profit ventures, not to mention a huge cadreselfless gratis/libre advocates.
- The target is, on average, a smarter crowd. Smarter notonly in general intelligence, but more importantly in thespecifics of the products and technologies that you’reoffering.
- This target market has been observed as being very thrifty(just ask how the tip-reliant in Las Vegas felt about Comdex).
- A sad reality is that some of the target market resents seeingpeers financially succeed. If you make a commercial product orsolution, expect your forums to be overloaded with the resentfulpointing out every marginally related open source competitor orfreeware. Expect users to claim their constitutional right to useyour information and services free of advertisements andrestraints.
- The target market is technically capable of circumventing ads,copy protection, and just about everything else you might throw upto earn or protect revenue.
- The market is being conditioned to believe that software andservices should be free (as in beer), or at least the costs shouldbe submarined into something else.
This isn’t to say that revenue isn’t possible — there arequite a few solution providers and websites doing very welltargeting the developer/geek audience — but instead is justan observation that it’s one of the most difficult markets totap. While many other domains sit underserved with a clientbase open and willing to paying fair rates for solutions, mostdreaming software developers still peg their dreams on building thenext Slashdot or tech aggregator or AJAX component suite or SQLformatter.
Software developers wage war over their saturatedmarketplace, building marvels of technical excellence in hopes ofgetting a piece of the table scraps, all while ignoring the muchlarger market (one in which people are actually paying $0.99 a dayfor a service to SMS jokes to their cell phone. In the tech worldyou can expect a fight to the death if a site demanded a $5/yearsubscription fee). I marvel seeing many of the simplistic,technically-deficient solutions yielding huge returns in otherdomains — earlier today I had to deal with a widely used “businessgroup membership” product, and I was astounded to see theenormous fees that went along with a subpar, circa-1995 erasolution.
A week or so I mentioned a desire to builda Firefox extension to perform site-specific time tracking andblocking. I also commented that “obviously extensionsaren’t a potential revenue market“. Not ever project has to bea revenue project (there are greater rewards than monetary rewardsin many quests), however not everyone agreed with myassessment.
[as an aside, a user comment noted that there is arecently released extension called TimeTracker, which displays your daily totalbrowsing time. While that product is extremely basic right now, itdoes discourage me from continuing on my extension quest — Idon’t want to interfere or seem to “rip off” the obvious growthpath of TimeTracker]
My reasons for believing that the extension market isn’t aviable revenue market are largely documented above. The onlycurrent revenue model for extensions, I believe, is byserving a master other than the user (e.g. Adware/spyware, or as abranch of a much greater service such as Google and their Googletoolbar).