When Web 2.0 Viral Loops are BAD for Business
By DONNA BOGATIN • May 17th, 2008 • Category: BIG PICTUREIs Les Moonves readying a give up your burgers and shell ought some dough for CNET membership campaign to beef up the veteran site’s revenue stream that CBS is soon to be the proud owner of? After all, CNET Editor-In-Chief, and perhaps soon to be CBSer, has some cutesy tech diet tips for the Web 2.0 economy, starting with the “cool app” that tech early adopters can’t seem to resist promoting themselves on, or writing about.
Dan Farber acknowledges “Much of what gets sent via Twitter is a form of self-advertising,” and pegs its monthly economic value at a “mere $5″:
That’s less than a day’s worth of coffee, a bacon cheeseburger with fries, a lowly beer, Farber advises.
But also undoubtedly less than the economic cost that would accrue to Twitter to assume the legal responsibilities that Farber says “of course” the Tweet platform would bear under the low price point “business model” he generously proposes:
The fee would have to include a quality of service guarantee and rebates for downtime. And, you would expect the owners of the Twitter or other services to be priced transparently and competitively, or at least reasonably if no serious competition exists.
The tack on a $5 monthly fee for “premium“ Web 2.0 service “solution” for the Web economy Farber merrily serves up is hardly novel, just ask Google: Apps Premiere.
Google has not gained desired results with its “premiere” Apps model, however. Its service “enhancements” are insufficient to justify enterprise adoption and not compelling enough for consumer users to up sell themselves from the Googley free one.
Apps Premiere is most likely a net negative for Google, given the increased costs it incurs to support the “enhancements.” Farber’s Twitter model menu is also likely BAD for business, just as his juicy “steak burritos, country omelets, beet salads and beers” are a generally unhealthy regime.
An economically viable Twitter “solution” will not easily be derived by overlaying an attempted revenue stream on the “cool app.”
While cheerleading investor Union Square Partners’ Fred Wilson publicly blogs away any need for an upfront business model, his real-world, closed-door, Twitter due diligence undoubtedly included an explicit itemization of every conceivable built-in monetization scheme.
The principal reason Twitter has no visible “business model,“ though, is because messing with users’ expectations of free Web 2.0 services would hamper a mass -traction, “viral loop” gold mine liquidity event eagerly anticipated by financiers.
Venture capital backed, Web 2.0 “cool” apps have the economic luxury of catering willy nilly to their non-paying users for years, regardless of ultimate long-term business consequences.
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