Web 2.0 Business Models (Part 2 of 2)

My last post covered the first five types of service categories, namely:

1. Virtual world, virtual goods
2. Online tools
3. Market broker platforms
4. Social media sites
5. Social networking sites

In this post, I will analyze the business models for other categories of services and point out some of my observations concerning the economy of attention, the long-tail, light-weight business model, young people's opportunities and the issue of partial attention.

Again, the list is not exhaustive and service categorization is mainly for the purpose of business model analysis. I would like to invite readers to add and give me comments.

6. Blog, podcast and wiki tools
Blog tools like Wordpress, Blogger, and Typepad provide easy platform for users to create their own blog with less effort. Some of these blogging platforms are backed by open-source projects, for example Wordpress and Movabletype. Therefore, the typical business model is free basic hosting and subscirption fee for premium services, which provide users with more functionality, control, storage and bandwidth. In case of Blogger, premium service fee was removed after the acquisition and the tool is funded by related services from Google.

Podcasting platforms are often free to the users, who are content producers as well. These platform are normally funded by bigger companies to complement their portfolio like Odeo by media search company Sonic Mountain or Yahoo!Podcast by Yahoo.

On the other hand, Wiki platforms started from the works of MediaWiki, a open-source  platform. There are quite a few encyclopedia platforms of the same concept with the free, well-known Wikipedia in other areas. New variances arisen to cater to needs like hosting service (e.g. Wikia) or access and write security (e.g. Wikispaces). These services often provide free basic services and charge for the premium.

7. Mapping tools
Mapping tools like Google Maps, Yahoo Map or Map24 provide users with free and exciting ways to find locations, driving directions and local search functionality. The business model is based on location-based advertising and reference fees. These services also provide free APIs for developers to develop new applications on the platforms to increase the popularity and attract more advertising revenue.

8. Mashups
Mashups are sites of applications that according to Wikipedia's definition, "combine content from more than one source into an integrated experience". Mashups are excellence chance for creative applications and light-weight business models. Based on APIs provided by major services (notably Amazon, eBay, CraigsList, Del.icio.us, Flickr, Google, YouTube) and other sources of data, hundreds of applications are created everyday. Some popular sites combine some search  (text, tag, geographic or a combination thereof) capability with advertising, merchandise sites, classifies, pictures, video, or sometime even webcam. The business models therefore are quite diverse, ranging from service fee, reference fee, commission to advertising or funding from related services.

9. Widgets, Web portals and Feed engines
The reason why I combine these services is the similarity in terms of user's option to choose contents and limited space, thus limited option to add to user-selected contents.

Widgets are small tools or codes that users can easily combine to their desktop, Web sites and blogs (like quite a few I have on the sidebars of my blog). Widgets are often small and many just catch reader's attention once, making it more difficult to place advertising. However, media or commerce companies are quite creative in creating relevant contents to distribute their information to the sites. An interesting article about the media companies' rush for widgets can be found here. A new business model for widget, which was not available before, is funding from these companies.

Web portals like Pageflakes, Netvibes and recently, iGoogle and Yahoo homepage provide users with ability to select from a large number of ready-made widget-like contents. Similar to the case of widget engines, these companies try to play the role of a platform by allowing developers to create new contents. They often get funding from related services or related media/commerce services.

Feed engines on the other hand have difficulties in adding/modifying original contents, so their business model is at the moment mainly funding from related services, or be a part of a bigger portfolio like in the case of Feedburner, which has been acquired recently by Google. A potential model is to invite the content providers to include advertising to their contents and share the revenue.

10. News channels
News, including live TV, channels are extensions of traditional news channels and newspaper companies, or aggregators for the users to customize the channels they want to receive. These companies therefore derive their revenue from advertising and funding from media companies, or companies that benefit from their advertising/PR.

11. Social bookmarking and clipping
Social bookmarking, or also known as social tagging or folksonomy, like Del.icio.us allows users to share, search and subscribe to their bookmarks. Clipping service like Clipmarks or Google Notebook on the other hand provides capturing, organizing and sharing/publishing Web contents. A new type of service, StumbleUpon is a way for people to share the new interesting sites they found.

By the nature, the services are free to the users and get their funding from bigger companies  or adversting.

Conclusions
From a first look, I notice a few interesting conclusions:

1. Advertising and funding from media, advertising or search companies is quite popular business model. The reason behind is attention. Since the attention is shifting to Web and personal, customizable contents, capturing such attention is important for new as well as traditional media and advertising companies. Web 2.0 is a major part, and also mostly funded by the "economy of attention". The acquisition price of Web 2.0 services is much lower than the current benefits, but reflects an expectation of a big boost in the future.
2. Sharing, collaboration and subscription provide a larger set of choices for the users, thus creating another popular type of business models bringing together the demand and supply, thus extend the demand curve toward low-frequency, low-volume direction. This is typically referred to as the "long-tail" business model.
3. There is a lot of space for creative light-weight business models. Many young people can leverage the power of the Web to create innovative services and applications without major investment and advertising. Costs to start a service sometimes is not much more and a hosted server, a domain, a couple of programming months and a good idea. Social media provides a perfect viral marketing medium, and also easy ways to achieve return on investment, which is sometimes advertising service one can setup in a few minutes. So why young people? Better than any other group, young people can come up with ideas that fit and spread the words among a large community of the young early-adopters and communities.
4. Web 2.0 users are dividing their attention among so many applications and services, not to mention the PC or mobile device used to consume these services is only one of many that a person use at the same time. As the result, to survive and thrive in a partial attention world is the skill that any Web 2.0 will need. Advertising and any other Web 2.0 applications/services should take this into account. The rule of thumb is, if you cannot get user's attention and interest in the first few seconds, you will never will.

 

Comments

[Thao Nguyen]

Thanks for your post. i found it's very useful for me.