Tuesday, August 01, 2006

Business Models for Web 2.0 content?

With all this huge amount of content being created via weblogs, picture and video platforms, I am wondering about viable business models for Web 2.0 services. Sure enough, there's contextual ads with a small reward to the users who include these into their web pages or weblogs, but to me, this is just a continuation of traditional ads business. There's subscription models - but who would be willing to actually pay to view user-created content? My guess is that subscriptions only work as an analogy to print subscriptions, i. e. you have high-quality content that is carefully selected and researched and published under a brand that you trust (e. g. IEEE or Springer scientific journals). But that would also apply to other publication forms (e. g. video). While the question of who will make money from user generated content is important, it is even more crucial to find out what the conditions are for any provider (content or service) to find viable business models.

If continuing to think about it, I would also have to include software (which is digital, after all). What is very common nowadays that you can use a basic version of a given software for free, with limited functions, with often a constant reminder to upgrade to a better version. Often, this only works if I am really able to see the benefit of upgrading - that's why we have trial versions for a limited time. My suspicion is that the given timeframe often will not be enough to see the return on investment. And that is exactly the difference to me between content (which I can read / view and instantly see the benefit that I have) and software.

Another issue about software is the relation between marginal costs and marginal utility. With all this free software being available (whether operating systems, office programs, security tools, viewers for multimedia formats etc.), I am not sure if the envisioned benefit is large enough for an end user to be willing to pay for something that, given the individual requirements, is also available without restrictions. In sum, this is about the question of the relation between freeware, shareware, open source and conventional software. And this applies to content as well.

So, what's the bottom line? It all seems to boil down to the issue of transparence of service quality and how much one is willing to pay for it. The service I get from Youtube, flickr and web hosting is storage space with some code around it that is running on the providers' servers. If I am lucky, I get a little support (e. g. a contact email address). Everything that goes beyond that, like consulting or problem solving, is expensive - and seems for me the only real means to make benefits more transparent. On the other hand, I also see (archived) newsgroups post that may also help me in many issues related to problem solving.

Content is king, and service the queen - provided that the quality is appropriate. Then, we can start talking about new business models. Of course, if there's no customer base, nobody is there to pay.

1 comment:

Dr. Matthias O. Will said...

Some interesting thoughts about potential business models can be read (in German) over there.