Sunday, August 19, 2012

What Works on the Web

I can't find the quote, but I remember reading around the time of the dotcom bubble a secondhand quote from a Japanese business executive--paraphrasing here--that the only things that make money on the Internet are sex and gambling.  He was wrong; advertising is very profitable.

It's ironic that in the height of the dotcom era, if you had a business plan with a monetization strategy of selling ads, you were often quickly dismissed.  Witness the latter day success of Google and Facebook. I bought a Google beanbag, before they invented Ad Words, because I so desperately needed their product.  Monetization is emergent from network effects.

Back when collegiate Internet stalking (aka The Facebook) was first blowing up, I started thinking about the Internet resources I found indispensable in my brief college career.  In the mid-90s, before Napster/Limewire/Kazaa/torrents, if you wanted free music downloads, you fired up an IRC client, joined #mp3 or #mp3central on Freenode or EFNet, and the friendly bots there would DCC you a list of the mp3 files their owner's had made available.  With patience you could find just about anything you'd want to play at a party.

While I was partying, my roommates were studying and doing homework.  Some of the grad student TAs had setup class websites with Java applet chat rooms.  Other studious individuals would share their answers--and more importantly--how they came to those answers.  These chat rooms were busiest the night before homework was due.

You see, the Internet has always been social.  Anyone wanting to get anything done has always needed other people: tutor, muse, compatriot, nemesis, partner, friend.  At the core of every human interaction is a give and take, a transaction of time or attention prosaically, but in a more important sense, a transaction of an intangible but indelible part of our selves--the currency that makes us human: ego-boo, whuffie, brownie points, karma, influence, power, etc.

If you want to start a company that exists primarily on the web, you'll be engaged in a kind of arbitrage of this human currency.  You must understand your particular arbitrage strategy and be able to articulate it.  This allows you to focus on those features of your service(s) that provide the best leverage and/or growth.

What works on the web?  Making people useful to each other.