In the wake of my Web 2.0 business model post yesterday, I’ve been thinking some more about Digg: Digg the cool service vs. Digg the business. To be honest, I’m not a huge Digg user, although I just installed the Digg extension within Firefox so I expect to be Digg-ing more often.
So, the question facing Digg (and the investors who just pumped $8.5-million into it) is how you take a popular, free service, and generate some revenue from it. The most simple route is advertising by running contextual-based ads against the content and/or attracting advertisers who who want exposure to Digg’s user base. Another revenue route is Digg Labs, which currently feature two projects – Swarm and Stack. Perhaps some of all of these projects can be turned into premium services.
Of course, Digg and many other popular Web 2.0 companies may not be in the business of creating sustainable business models. They may simply be in the “build it and they will buy” business where you strike lightning in a bottle, run as fast as you can for as long as you can to get as many users as you can so someone decides to acquire your users and database.
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I think you are exactly right with the idea of running fast and hope for a buy out. And why not? Companies like Google are basically buying companies for the users so that they can expose advertising to them using their own business models. The way to fast cash is to hit em hard and when you get a chance to bail with enough money to make you retire, you do it.
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[...] Inspired by my examination of Digg’s business model earlier this week, I’ve moved the spot to MyBlogLog, which has been getting an awful lot of attention (see this ZDNet mini-review) ever since reports Yahoo was going to acquire it for $10-million. I’ve been using MyBlogLog for a long time as a tool to track what posts people are reading and what sites they are coming from, as well as a cool widget that tells you how many times a particular link in a post has been clicked on. Mostly recently, MyBlogLog has been attracting users with a social networking tool that lets you add other MyBlogLog users to your community. There’s also a widget that tells you the other MyBlogLog users (including their photos) who have visited your site. So, how does MyBlogLog make money? From what I can tell, it’s mostly from a premium service ($3 a month or $25 a year) that lets you see your statistics in real-time. This compares with the free service that lets you check statistics from the previous week. I suspect MyBlogLog’s push into the community/social networking markets has two angles: it attracts new users, which makes the company more attractive to potential advertisers and/or suitors; as well as creating a larger audience for the premium statistics services. If you believe where there’s smoke, there’s fire, Yahoo’s apparent interest in MyBlogLog suggests the company could be the next Web 2.0 start-up to be snapped up. « Toronto Hydro Wi-Fi is Awful [...]