A Growing Internet - Why Thinking Ahead Can Be Profitable
More than 870 million dollars were poured into web2.0 startups in 2006. By 2010, one billion internet users, or roughly 16% of the world’s population will be sharing the World Wide Web. This means massive profitability potential against a business model that traditionally enjoys relatively low operational costs. However, lucrative profit margins alone tend not to wet the appetites of most savvy venture capitalists; it’s that big ticket acquisition that makes all the hard work worth while. It’s the reminder that a small group of web-savvy individuals built a video site that was purchased for 1.65 billion dollars. It’s the reminder that YouTube generated explosive success, and in time they might too.
YouTube understood their audience and what internet users wanted: free video entertainment outside of any schedule or restriction. The internet strives, just like television and radio work desperately to try and find their audience. Pandora, another emerging Web2.0 company, provides a wonderful service for its users: free music. Pandora helps people find new music by discovering patterns in songs and artists that an individual already likes, and then replicating those patterns and suggesting new material that can be voted on to further the accuracy of the search.. What better than to have a machine that finds new songs that you’ll love based on a scientific formula, and for free? This is another gratis and valuable service that should eventually meet its exit strategy.
With two examples of leading web businesses, one mature in popularity and another on the right track, I’m reminded of Say’s Law, “supply creates its own demand.” While any research analyst will tell you that more people will be using the internet tomorrow than today, demand it simply not enough to excel as an E-Business. We learned that lesson several years ago when the bubble burst and left thousands scratching their heads wondering what went wrong. What entrepreneurs must do is first recognize the growing demand, but put special emphasis on understanding their internet audience, and supply a free and enjoyable experience with a very clear message. Those who supply real value will prosper in the end.
Sam Harkness is a manager of business channels and partnerships within the web2.0 community. You can reach him at sammyharkness@yahoo.com
Tags: competition, domains, ecommerce, exit strategy, venture capitalists, Web2.0, websites, www
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