Given the current economic landscape, there are plenty of “Web 2.0″ companies struggling to stick around. Many of them are slashing costs in an effort to make their financing last as long as possible.
Many of these companies have business models built on the premise of offering a free service, and generating revenue from advertising. If you have a compelling service, this model can work but these companies are increasingly vulnerable given that online advertising growth has stalled, and that advertisers are probably looking to be more conservative.
The “free” business model has captured most of the attention and encouraged the emergence of thousands of start-ups. It’s been great for consumers and beta junkies but it is proving to be a difficult model to create a sustainable business for most companies trying to use it.
Over the next little while, many of these free businesses are likely going to disappear when their financing disappears and they are unable to generate enough advertising revenue.
This will not necessarily be a bad thing given it will cleanse the ecosystem, and give healthier companies a better shot at success. This “process” happened during the last dot-com boom, and set the stage for the emergence of Web 2.0.
Seemingly lost amid the fascination with the free business model is how some businesses (Freshbooks, Agroracom, 37Signals, LinkedIn) have thrived by actually charging customers to use their service.
It’s been a somewhat of a radical concept – actually getting people to pay for something – but you’d be surprised by how many people are willing to pay for a valuable, useful service.
What’s somewhat surprising is how little attention these sales-driven companies seem to receive, especially compared with the enthusiastic coverage of new start-ups using a free business model that are trying to grab a foothold in competitive markets.
For some impassioned thoughts on the Web 2.0 business model landscape, check out Agoracom’s George Tsiolis. As well, Fortune magazine recently had an article on the end of Web 2.0, and the emergence of Web 3.0.
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Pay for a Service? How Radical
Given the current economic landscape, there are plenty of “Web 2.0″ companies struggling to stick around. Many of them are slashing costs in an effort to make their financing last as long as possible.
Many of these companies have business models built on the premise of offering a free service, and generating revenue from advertising. If you have a compelling service, this model can work but these companies are increasingly vulnerable given that online advertising growth has stalled, and that advertisers are probably looking to be more conservative.
The “free” business model has captured most of the attention and encouraged the emergence of thousands of start-ups. It’s been great for consumers and beta junkies but it is proving to be a difficult model to create a sustainable business for most companies trying to use it.
Over the next little while, many of these free businesses are likely going to disappear when their financing disappears and they are unable to generate enough advertising revenue.
This will not necessarily be a bad thing given it will cleanse the ecosystem, and give healthier companies a better shot at success. This “process” happened during the last dot-com boom, and set the stage for the emergence of Web 2.0.
Seemingly lost amid the fascination with the free business model is how some businesses (Freshbooks, Agroracom, 37Signals, LinkedIn) have thrived by actually charging customers to use their service.
It’s been a somewhat of a radical concept – actually getting people to pay for something – but you’d be surprised by how many people are willing to pay for a valuable, useful service.
What’s somewhat surprising is how little attention these sales-driven companies seem to receive, especially compared with the enthusiastic coverage of new start-ups using a free business model that are trying to grab a foothold in competitive markets.
For some impassioned thoughts on the Web 2.0 business model landscape, check out Agoracom’s George Tsiolis. As well, Fortune magazine recently had an article on the end of Web 2.0, and the emergence of Web 3.0.
Technorati Tags: freshbooks, agoracom, web 2.0