I spent the day at Facebook Rev's incubator launch event. Very interesting to think about what is common between all the startups. They all are iterations on successful business models from both Web 1.0 and Web 2.0. Travel, dating, jobs, etc. We have seen these models work pre-Internet and post-Internet.
There is a revolution in the distribution/advertising model that changes the business model. As an example, online dating took a $5 billion dollar industry and changed it into an insanely profitable $400 million dollar industry. I see the social networking companies doing the same thing.
Over and over at the event and after, I was asked by investor types, what is the monetization model???? As a coder and entrepreneur, I talked shop with the startups and here is what I discovered. When your customer acquistion cost is exactly zero per user, and your cost to service the user is around $.001 per user per month, you don't need much monetization. Most of the companies can put up some sort of advertising and get all of $.01 per visitor per month. This is a 90% profit after cost of goods sold.
If you look, Facebook's market share is at 250 million. A 10% market penetration will lead to a $250,000/month business with very little cost.
I think we are in the next revolution. It is making me rethink old assumptions and ask myself what business niche hasn't been overturned yet???
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Have you read Free: The Radical New Price? you're right in line w/ some of that. and it does change almost everything it touches...certainly everything that is digital or can be digitized.
ReplyDeleteI ordered it after you mentioned it on the last comment. So by end of the next week I will be able to say, "Why yes I have read that book."
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