Interesting article about getting value from your customers:
“It costs less and less for us to get up and running. Still, sooner or later – you need to make money. By not getting value back from users, we’re increasing the failure rate of our businesses.”
It still boggles my mind when I read about a company with $0 in revenue getting a muiltimillion dollar valuation. I can see indirect value, as in Google News bringing more people to Google, which makes Google more money in the long run. But for something like Twitter to be valued at… what? $75m? I can’t fathom that.
One day this’ll all make sense.
Update: This article by Greg Sterling, an eBusiness guru, expresses similar concern:
Stepping back, it strikes me that there’s something quite “dysfunctional” going on in the way that many entrepreneurs and funders think about building online businesses. Historically people in the real world who start businesses have not gone in with the attitude: in three years someone will buy me and I’ll never work again or maybe I’ll go start another business that will be acquired in another three years.
The beauty of code is that it costs nothing for the developer to create. From a business perspective it makes sense to pay overhead for a product that is tried-and-true to its use.
Apps like Twitter get bought out all the time, many of them are not as huge, but it happens pretty regularly. I had built a social network for creative-types at Create Communications over the past year and a half that had 13k accounts. They got bought out simple because the competition isn’t worth it; and every user/viewer has a value to a website because of impacts from advertising, community build-up, and even the old “word of mouth” spread of an idea or product. If you have 10 million people using your product every month, you can guarantee a fat check for that.
A great way to get attention is open-sourcing. People can not only find use from your product but also developers can learn from it.
Hey John, I think you make a good point about the net effect of high traffic websites: “…every user/viewer has a value to a website because of impacts from advertising, community build-up, and even the old “word of mouth” spread of an idea or product”
Can you elaborate on community build-up? I’m not sure what you mean.