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Wednesday, 27 May 2009

Community interactions as business models for the Consumer Web

We are still struggling for business models in the consumer Web. NYtimes has an article that says how Web startups are looking beyond advertising for revenue streams:

Now advertisers have cut back their online spending. So Web start-ups are searching for new ways to make money, like selling real, or virtual, goods or asking customers to buy subscriptions.

Related to it is another article that describes how a TV network is failing to monetise the Susan Boyle's web fame:

FremantleMedia Enterprises, a production company that owns the international digital rights to the talent show, hastily uploaded video clips to YouTube in the wake of Ms. Boyle’s debut, but the clips do not appear to be generating any advertising revenue for the company. The most popular videos of Ms. Boyle were not the official versions but rather copies of the TV show posted by individual users.

While both articles pointed to the difficulties in generating revenue through advertising alone, they also hinted at a much bigger opportunity: business models that focus on community interactions.

In the first NYtimes article quoted above, it talks about how a startup in online gaming is earning revenue by enhancing the community interactions:

When YuChiang Cheng co-founded World Golf Tour, an online golf game with high-definition graphics, he wanted to make money from every player. Only 5 percent of World Golf Tour’s 250,000 players pay for things like $1 putters in the virtual pro shop or an $18 tournament entry fee, but it gets two-thirds of its revenue from such purchases. The other third comes from ads, including banner ads and tournament sponsorships.

Another example of a business model build on community interaction is Nico Nico Douga:

Japan’s second largest online video portal - Nico Nico Douga - has succeeded in engaging its target audience of young Japanese consumers.
Nico Nico Douga - a homegrown video-sharing community - grew to 7 million registered members between its January 2007 launch and July of 2008.

I have written about this before and here is what I said:

They have also show that it is possible to build a business if you give people the ability to converse, to personalise their conversations and to integrate the conversations around social objects.

So, in summary, are community interactions the path to substainability and profitability for consumer facing applications? What are your views? If you have startup in this space, does this make sense for you?