WEB2.0 Business Model

hkn

WEB2.0 Business Model [Copy link]

Business Model and the Internet's Weakness

2006-7-17

Web2.0 emerging websites have undoubtedly acquired considerable stickiness and core strength for survival. However, their ultimate goal is to convert attention into cash.

　　With the capital of the attention economy, how to convert this huge stickiness into real cash is a test for every Web2.0 explorer. Only by successfully achieving this can the Web2.0 Internet business model be said to be successful.

　　This is related to the discussion of the business model of Web2.0 emerging websites, which is almost a core issue that all Web2.0 practitioners and investors are concerned about, and it is also the most vulnerable point for Web2.0 emerging websites to be criticized.

　　Maturity takes time

　　Russell Beattie, a mobile industry strategist at Yahoo, once criticized Web 2.0 for not having its own profit model, claiming that from now on, 99% of the companies claiming to be Web 2.0 cannot find their own profit model. This is almost the unanimous argument against Web2.0 now. It seems that because of this, all the explorations and practices of Web2.0 to bring new ideas to the Internet are questionable and redundant.

　　However, successful Internet people who hold this view probably often forget the pain after the wound heals. In the early 1990s, almost all Internet operators were accused of similar things, but this did not prevent portals, search engines, and e-commerce from achieving brilliant success after entering the 21st century. Portals' "advertising + games + wireless", search engines' "pay-per-click ranking", e-commerce "B2B", "C2C" and "auctions" have all successfully achieved the ultimate goal of converting attention into cash, bringing hundreds of millions of real money to Yahoo, NetEase, Sina, Google, Baidu, eBay, and Alibaba, creating amazing value for these companies.

　　However, early search engines, portals, and e-commerce were also suspected of having unclear business models and no clear profit points, but after 2003, no one would doubt that these websites were not profitable. If you count carefully, people explored the Internet field for at least five years from the early 1990s to 2002.

　　Therefore, after the first generation of portals, search engines, and e-commerce giants have worked hard and made a lot of money, it is a bit unfair for us to comment on or even blame the emerging Web2.0 websites established since 2003 for their unclear business models and lack of profits. There is no doubt that unclear business models are a common fact for 99% of emerging Web 2.0 network companies, and it is a weakness that is shared by Web1.0. However, the business model has gone from unclear to clear, and the company's profitability has gone from nothing to something. This is a natural historical process, a process that requires constant efforts to explore and discover. This should not negate the significance of the existence and development of emerging Web2.0 websites.

　　Xie Wen, the former president of Hexun.com, once pointed out very objectively that it takes time for the business model of emerging Web2.0 websites to mature. Xie Wen believes that it takes a lot of hard time for a business model to mature, the market to mature, and users to be recognized. Three years is not a long time. To be conservative, it is three to five years. This should be a normal expectation. Xie Wen's so-called expectation is to be profitable with scale, stable growth trend, core competitiveness and listing on NASDAQ. The first generation of portals, search engines and e-commerce websites also took at least three years to go through this process. Therefore, we need a rational and objective attitude when facing the emerging Web2.0 websites, allowing them to find a suitable internal business model in the natural historical process and realize their potential business value.

　　Now, who laughs at whom

　　? In fact, from the current development reality of the emerging Web2.0 websites, some websites are already generating huge business value.

　　For example, the social website Myspace had an annual revenue of 400 to 500 billion US dollars in 2004 and 120 million in 2005. The American P2P file sharing website Bittorrent earned 8 million US dollars in revenue from two college dormitories last year. It has recently signed agreements with seven or six Hollywood movie giants to start online distribution of movies and entertainment video content, opening up a new model of P2P profit. LinkedIn, an American social network, ensures the quality of social networks through strict centralization and collects more and more membership fees from individuals and enterprises by providing interpersonal communication services.

　　Gogosun, an online network magazine founded in 2005 in mainland China, made a net profit of about 20 million yuan that year through a paid subscription model. Gogosun's sales revenue this year is expected to be 200 million yuan, and its profit will exceed 50 million yuan. Pengpeng.com has created an "interest + dating" type SNS social networking website and has also explored a new business model: WAP2.0+ Web2.0, combining wireless resources with SNS dating, solving the profit bottleneck of Web2.0.

　　This shows that emerging Web2.0 websites have exciting new business models that are different from 1.0 to some extent, and have the potential to achieve profitability with large-scale rapid growth. Therefore, they have won the favor of venture capital. Gogosun received a total of 20 million US dollars in venture capital from Softbank (China). Pengpeng.com received 12.5 million US dollars in venture capital from Softbank (China). LinkedIn received $15 million of venture capital from Sequoia Capital Partners and Greylock Partners, two well-known venture capital firms. Oak Pacific Interactive, led by Chen Yizhou, a typical Web2.0 network company, received $48 million of venture capital from GA, DCM-Doll Capital, TCV, Accel Partners and Lenovo Capital with an annual profit of over 200 million yuan.

　　Behind these large investments are investors' affirmation of the business model of emerging Web2.0 websites and their optimistic expectations of future business value. They are not crazy gambles and unsure speculations by investors as rumored. Anyone with a little common sense of venture capital will understand that now is different from the 1990s when bubbles were everywhere. After experiencing an Internet bubble crisis, today's investors are more "cold". No one can fool investors' "capital" with a business plan and a bunch of "gorgeous" concepts like 10 years ago. Behind the seemingly frenzied and intensive investment are investors' prudent considerations and rational and optimistic expectations of the new value of Web2.0.

　　Mary Meeker, an analyst at Morgan Stanley, who is known as the queen of Internet investment, once said at the "Web 2.0 Conference" held in October 2005, "Everything that has happened in the Internet in the past decade is just a rehearsal, and the changes have just begun." In the "Global Internet Trends" research report she published this year, Mary Meeker paid special attention to the emerging trends of the newly emerging next-generation network (Next Generation), and fully affirmed the innovative explorations made by social networks such as orkut, facebook, myspace.com, and emerging Web 2.0 websites such as Flickr, del.icio.us, Wikipedia in the three key aspects of "user-generated content (UGC)/personalization/community". Mary Meeker believes that these three points are the three key links for the success of future Internet sites.

　　Ray Lane, who is currently a general partner of Kleiner Perkins Caufield & Byers, a top venture capital firm in the United States, and who served as president and chief operating officer of Oracle for eight years, holds a very optimistic view on Web2.0. He believes that the new wave brought by Web2.0 companies has already had a strong impact on the software industry and enterprise management. 2.0 has become a direction because it provides users with a more natural experience. It is currently expanding from consumer applications to enterprise applications. Ray Lane himself is currently cultivating a series of emerging Web2.0 companies such as Visible Path and Spikesource. Although in Ray Lane's view, only 300 of the 5,000 companies that have emerged may survive, these 300 companies will reflect their true value because they have been cruelly tested and selected by the market, and will truly change history and cause huge changes in business.

　　Therefore, when we really consider the value of emerging Web2.0 websites, unclear business models should not be used as a reason for ridicule and blame. Just like these active explorers, we need active exploration and discovery, rather than general and sloppy denial and judgment and meaningless cynicism. In fact, as more and more Web2.0 emerging websites convert their huge stickiness into a steady stream of real money, their business models will become more and more mature, and their value will be increasingly understood and recognized by people. And those doubts and ridicules will eventually get their due rewards - when Jeff Bezos first founded Amazon, people kept doubting and ridiculing everything he did, thinking that Bezos and Amazon were just a stupid joke. Later, after Amazon's successful IPO, Time magazine used a very interesting title for its cover story on Bezos - "Now, Who's Laughing at Who".