This is the second part of the notes taken reading this book (the first part was in the previous post).

Simplifying maybe too much the cases, the objectives of the organizations can be put at least one of these three great scopes: to offer a service, to get economic revenues and to survive. In order to satisfy this scopes, an organization moves can be more or less ambitious, more or less social, more or less capitalist, to put some adjectives.

The simple use of ICT (Information and Communication Technologies) is no more a competitive advantage. Simply, if you don’t have ICT you can not be competitive and you are condemned to disappear. And it seems to be that in a quite immediate future the social and relational capacity, that lies beside the concept of Web 2.0, is going to be a requirement to survive: the consumers are more informed and more connected, and don’t tolerate the companies that are not connected, do not listen, do not participate, and that do not understand that the markets are like conversations.

Even if there are companies interested in the Web 2.0 phenomenon for nonlucrative reasons, it is necessary to accept that an organization needs to obtain and economic income to be able to maintain its activity. This is necessary, and if an income does not arrive from capital movements between partners and shareholders or from investments from venture capital, it would be better to offer an activity that generates some type of economic income. In the case of 2.0 initiatives, the strategy to obtain those direct incomes depends very much if we base our activity on the existence of an user base (and we earn an income connecting to it someone else) or on a technology (and we earn an income offering it to the users).

1.1. Business models based on the users

The models of business of Internet present great similarities with the ones of conventional communication channels. So it is logical that they have similar strategies to get an economic revenue:

• Advertising
  The network is the force that sustains many 2.0 initiatives, since these are mainly based on the aggregation of individual efforts that end up constituting a network of shared knowledge. The greater the number of people sharing, the greater the utility of the proposed service. All of them base their force on the contribution of potentially millions of people, which potentially provides them millions of visitors as well.

  But until now who wished to have an adverstise on its Web page had to manage it: an enormous work that needs special knowledge and abilities and, moreover, takes a lot of time. And here it is where Google made a very important contributionl: it developed a technology that allows it to vary the adverstises in its search results on the concrete words that each user was looking for. That is to say, customized contextual adverstising.
  But for Web 2.0 the really excellent thing happened when Google decided to offer the contextual advertising to other Web pages and created the AdSense (wikipedia) affiliation program. The webmaster an AdSense affiliated Web page can decide in what pages and where he wants an advertise, and Google analyzes in real time that context and locates the most suitable announcement there. Google will receive from the advertiser an income that is based on the effectiveness of that announcement, and will distribute part of those income with the owner of the Web page where the announcement has appeared. In this way, thanks to AdWords (wikipedia) an advertise can appear almost in any page, and as well, thanks to AdSense any page can have an income publishing in a simple way and without assuming costs nor tasks of management. AdSense offers a model of income that increases in direct relation to the volume and quality of the users, although it is possible to have an estimation (not very precise) of the income by means of TextLinkAds, a web page that simulates an estimation of daily income and/or monthly based on the web page address and the position in the page where we would put the AdSense announcements.

• Commissions
  Another option of economic income tied to the users is charging commissions by transaction. If the people who use the service conduct economic operations among them, normally buying and selling, the promoter can aspire to get a commission on them.
  The classic example is eBay. The hundreds of millions of transactions that take place every year in eBay at world-wide level are subject to one double tax: some for the announcement (from 0.05 euros to 2.50 euros, based on the price of the product for sale) and the same by commission on sale made (in the worse case it is supposed to be even a 5% of the final price of the product¹ ).
  The other classic example is Second Life (wikipedia), where millions of avatars (each one of them belonging to a real person) meets participating in a virtual economy (they buy, sell, start businesses and companies) and every transactions is done by means of Linden Dollars (also called L$ or LindeX).
• Donations
  The social character of many of the 2.0 initiatives causes that in many occasions his users constitutes an users with a high degree of complicity with the project. Their members or users are people who contribute to the success of the initiative by means of their contributions of contents and their fidelity demonstrated in the reiterated visits, but there are some of them who want to go beyond that and want to demonstrate their affection to the initiative by means of economic contributions. These are contributions without any claim than the one to try to help the initiative, since they do not obtain any rights on the results nor any participation in the economic aspects in return. The classic example of this model is Wikipedia.
• Pay per view
  To register the user is an habitual practice in the majority of the Web sites, but in Web 2.0 it is exceptional to have to pay to accede to the registered zone or certain contents. Most of the initiatives that manage their users with subscription models are used to do it more as building customer loyalty than as getting a direct income. A movement like the 2.0, which is based on a the contents that have been generated by users, will be a priori quite obstinate to a proposal that tries to receive an income to give access to such content. And if the expectation to receive an income is based on own proprietary contents that have not been enriched by the users, no longer we can speak of a model of business based on concepts of the 2.0, but on concepts of the most classic Internet.

  The Web 1.0 explored the model of business of pay of per view, specially in the world of the press, but always with a relative success as it demonstrates the fact that the majority has left this solution. One of the sectors that follows with a business model of pay per view is the one of sex, for obvious reasons, but it adopts different shades when the initiative is based on contributions of the users, as it is the case of Marqueze², who has a long history³.

• Studies and analysis
  The Web 2.0 services have an user base that relies on participation, contributing texts (Wikipedia), connections (del.icio.us), photos (Flickr), videos (YouTube) or professional data (Xing, LinkedIn or the Spanish Neurona). Therefore, if the administrators of these projects analyze the contributions done by their users can collect very interesting qualitative data in the if the user base dimension is significant, and there many companies who pays to know these results.
  For example, Flickr⁴ maintains a page where it informs on which cameras are more used by its users and seems reasonable to think that it has the capacity to associate models of cameras to geographic, age and population statistics, types of photographic style, and so many others possibilities that without a doubt would be interesting for the sector.

1.2. Business models based on the technology

Another group of options to generate economic income is related to the ability to offer advanced benefits to the users. These are businesses that give something more, as we are talking about Web 2.0 and therefore about services that offer already something for free.

• Pay for Premium Use
  The examples of paying to access to greater benefits are common in initiatives that base their force on a technology. There are two types: those that make users pay to give access to greater capacities, or those that make users pay to give access to new benefits. The 2.0 initiatives offer to the users the capacity to generate and to interchange information and contents, and it entails an important bandwidth consumption of resources or disc capacity, for example. Some of these initiatives develop a model of income based on improving those benefits to those users who are willing to pay for that reason. A good example is Box, a service that offers for free 1 Gb of virtual hard disk where the user can keep and share any type of file, and that by 4.99 US$ per month extends the space until 5 Gb. Another example, if not more popular, is Flickr.
  The other option is make users pay to give access to improved functionalities as Wordpress.com does, one of the most used blogging platform, when the user wishes to go beyond what is offered in the free basic version⁵.
• Corporative services
  Sometimes the possessors of a reliable technology freely offer their service to the general public in order to demonstrate their effectiveness and to continue improving the product, and with the intention offer it commercially for the companies. A good example is eConozco⁶, a social network that offers customized services for companies and associations.

(end)

1. http://pages.ebay.com/help/sell/fees.html [↸]
2. http://www.laflecha.net/canales/empresas/articulos/marqueze_-una-decada-creando-una-imagen-de-marca [↸]
3. http://www.laflecha.net/canales/empresas/articulos/publirreportaje_marqueze [↸]
4. http://www.flickr.com/cameras/ [↸]
5. http://www.wordpress.com/advanced-services/ [↸]
6. https://www.econozco.com/?ac=globalHelp&key=faq#_Toc57743135 [↸]

Tags: Economy, Web 2.0