The web startup world fascinates me. It simultaneously contains the most potential of any industry, and yet, is also the most precariously positioned. For example, Facebook is a company managed and owned by some of the smartest minds in the world, and yet these same genius-level strategists can’t seem to figure out how they will make money; a strange quandary when you think about it. Facebook needs to innovate and test new routes to monetization, but fearing backlash from another Beacon-type scenario, it must get its next attempt exactly right. Facebook’s is a situation that will undoubtedly make for one of the great Harvard Business School case studies of all time. Yet, at least Facebook has set a precedent that users must sacrifice *something* for use of the service. What happens when a service with no precendet, like Twitter, tries the same?Â
For any true strategist or problem solver, the monetization issue facing Facebook –and all other web startups — is a true intellectual challenge. In many ways, the credibility of the entire web 2.0 movement hinges on the success of just one service cracking the monetization code. The triumphant strategy to monetizing any of these services is arguably more valuable than the services themselves.
Facebook executives might tell the world that they are not immediately concerned with making money, but these are half-truths at best. Deep inside company walls, monetization is most certainly the number one concern. The fact that Peter Thiel, Mark Zuckerberg and now Marc Andressen have spent years strategizing on how to make money and not yet come up with the killer solution, astounds me.
It also begets questions such as, what is the true value of web services to users? Is there enough value in any aspect of current services that users would pay outright for access? Does the virtual word inherently have less value than the physical world? If so, what are users willing to sacrifice to keep the status quo at free?
At some point soon, something needs to give.
My feeling is that the answer does like in the monetization of users – but maybe not related to the currency we expect…
To quote a passage often quoted on this blog:
“Money is the material shape of the principle that men who wish to deal with one another…[that] they must deal by trade and give value for value.”