March 15th, 2006

Monetize This!

by Joshua Porter  |   6 Comments

Martin Lamonica’s piece Making Web 2.0 Pay is indicative of the growing concern among Web watchers, venture capitalists, and other interested techies who are worried how to monetize the amazing innovative period we’re in. However, I think his piece, though illuminating, is exactly the type of thing that developers should run away from immediately because it focuses on the problem of making money at the industry level, and not the level that matters: the level of your individual users.

In his piece Martin discusses issues like making money via mashups, building to flip, and commodity office applications and points to several reasons for the new boom:

1. High-speed internet connections
2. Ajax
3. APIs
4. Cheap startup costs

So Lamonica’s point is that it is simply easier to create now. These seem like very reasonable factors for the new companies and products we’re seeing. However, simply having the means doesn’t really lead to innovation…but solving someone’s problem in a better way does. So in addition to technology-related reasons, I would add a couple more factors to Lamonica’s list, including two that can directly lead to solving people’s problems:

1. Increased attention pain
   Techies, who are often ahead of the curve in most areas, are feeling the pain of increased pressure on their attention more than anyone else. Especially those who read RSS feeds. This is an obvious problem, and so is a great place to look to innovate and build.
2. Increased frustration with desktop software
   You don’t have to replace something that works great. Desktop software, though it works well for a single person talking to themselves, is horrible at leveraging the network. (it wasn’t built for it) The frustration we have with the inability to communicate with every tool we use leads to new innovation as much as simply the possibility of it.
3. High profile success stories
   It’s easy to imagine growing a business and getting bought out by a big company. However, the ability to imagine it is nothing compared with seeing it actually happen with 1 and 2 year-old companies like Flickr, Upcoming.org, Writely, etc… These are the canaries in the mineshaft for the onlookers just waiting for the water to warm up before they jump in.

Giving away the prized milk cow

Certainly, in an effort to get a network effect many companies are giving away their prized milk cow by failing to charge for their service. But the thing is, people don’t mind spending money on things they find valuable. Why else would teenagers spend 2-3 dollars each for dozens of ringtones? (This is something I will never fully appreciate)

Instead of worrying how everyone else makes money with Web 2.0, I wonder if developers should ignore articles like Lamonica’s and instead worry about how they can solve the problems of their users. If they can do that, then they won’t have any problem making money. Focusing on mashups in general and getting bought out are not focusing on real problems. So I hope that developers don’t get too discouraged by Lamonica’s piece…and instead keep forging ahead despite the concerns.

I don’t remember where I heard this next quote but I think it still rings true, especially in light of the increasing questions we’re facing like those in Lamonica’s article:

All businesses succeed for different reasons, but fail for the same ones.

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