What is the business model for the Web?

Dec 20, 2008

Categories: Featured, Internet Life, Web 2.0

Wow. Digg bleeding cash, ad revenues tanking, everyone want stuff for free–is there a smart, safe, and sane business model for the web?

The same cannot be said of Digg, a site conceived by television host Kevin Rose as a replacement for the editors who pick headlines for readers. On Digg, readers vote headlines up by “digging” them, or down by “burying” them.

For now, Digg is safe, insulated from the marketplace as a well-funded private company. But if Adelson no longer plans to sell the company, he will have to take it public. And when the day comes that investors can vote the company’s shares up or down, unless he can engineer a dramatic improvement in its finances, he and Rose will know what it feels like to be buried.

[From Black Holes: It Costs Digg $5 Million a Year to Run the Internet]

My question is only partially rhetorical. I know there are great business models online, but one of the staples of many of the companies I’ve been around have had the plan to get cash through ad revenue to offset investments, etc. Really this wasn’t a bad plan not too long ago. We see now that a business based solely on ad revenue will have a tough go of it. Okay, great what’s the other option?

If you look at newspapers they use ad revenue, but that is combined with classifieds and subscriptions. Unfortunately Craigslist pulled the rug out from under the classifieds and people are getting their daily news from the Internet and other sources, so we see where newspapers are now.

Subscription models used to work when the content you got for free was so-so at best. Now the free content online is amazing. Sure we’re tried doing subscriptions for online publications, and for niches I think they can work, but on masse? Not so sure.

What I’m thinking is as trends like the Detroit Free Press reducing home delivery and large media corporations have a harder and hard time making a go of it, is that we’ll see the ad market perk up.

As soon as it’s a provable fact that ad spend online turns into sales offline–well maybe we can start making money with ad revenue again..

Maybe

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Tags: advertising, business models, Web 2.0

Comments to “What is the business model for the Web?”

Anthony Nicalo | December 20th, 2008 at 9:11 am |

It sure is an interesting time. Seems like the best revenue models on the web are the ones that use it to sell something offline. I am sure that @garyvee and @gapingvoid could tell us all a thing or two about measuring it.

Jon Husband | December 21st, 2008 at 9:26 am |

I think you are right .. and what's more, I believe that the capabilities to address your premise are out there. All it will really take is the ability to easily, and consistently, track the path from ad impression and / or click-through to fulfillment (ad-to-sales ratios). CPM rates have always been a proxy / estimate with respect to this.

If I am not mistaken this is what the "gesture economy" and the tracking of clickstreams was / is all about (Steve Gillmor used to talk about this all the time and was supposed to launch something called the Attention Operating System, which I believe morphed into the Attention Trust) and there were a few companies that started in on assembling and implementing the necessary technical components.

And of course there's always "post-centric advertising", no ? As always, good inventory, knowledge of useful key words (and in the best of all worlds, a kick-ass algorithm that made relevance better that AdSense) will be necessary. You know all this, you helped figure out a bunch of it a couple of years ago.