Oct 31 2008
Web 2.0 Business Models: Enterprise in the Second Coming of the Web
When Web 2.0 came along, it changed the environment of the Internet in a significant way. No longer were traditional dot.com versions relevant. Web 2.0 seriously rocked the boat. It also changed the way online and offline businesses looked at the use of the Internet as a way to make money. Here, we take a look at Web 2.0 business models and how they have evolved to fit the new environment.
Web 1.0 vs. Web 2.0 business models
If you take a closer look at Web 2.0 models, you’ll find that they do not significantly differ from their Web 1.0 counterparts. The changes instead occurred on the reasons why these Web 2.0 business models were chosen and implemented. Consider, for example, the factors that have paved the way for Web 2.0 environment:
Faster Internet connections
At broadband speed, users had more reliable access to information on the Internet. Negotiations, sales,
advertising and other business transactions could be completed within a very short period of time. Faster speed connections also demanded for higher transaction security that will assure the users that their business was safe and accurate. For Web 2.0 business models, this was a good foundation.
Low-cost start-ups
Another factor that contributed to the creation of Web 2.0 business models is the fact that businesses did not need a lot of capital in order to begin. Businesses could start operating for just pennies and the return on investment could more than make up for that small amount of money.
Free stuff
The availability of free content and software also made an impact on Web 2.0 business models. Business owners and entrepreneurs had to seriously consider their goals and come up with business techniques that adapted well to the prevailing conditions while remaining competitive.
Types of Web 2.0 business models
Apparently, there are two main types of Web 2.0 business models: one that is technology driven and another that thrives on networking. Let’s take a look at how they work.
Technology-driven business model
This type of Web 2.0 business model includes businesses that are based mainly on developing and providing products and services that promoted innovation. The more unique and useful it was, the more valuable it becomes. The unique characteristic of this business model is that it is available for free. Or at least, part of it. A user can join, sign up or participate without paying for anything. Investment only comes in when the user wants access to premium content and accounts or wants upgrades.
But how does it pay for itself? The secret is in critical mass. If an online company using this business model has to survive, it must be able to design an effective pricing point that will be sustained by a group of users who pay for premium products. Once this number reaches a sufficient point, the amount these users will be paying will more than make up for the amount not being generated by non-paying members.
Network-driven business model
The other type of Web 2.0 business model is one that is powered by network effects. It thrives on user interaction and also uses technology but only as a tool of infrastructure. In this business model, it is critical
that companies are able to encourage members or subscribers to use their service or risk losing them to someone else.
So how can a network-driven Web 2.0 business model earn? For one, through time-tested advertising, charging fees for premium spots that are more likely to attract customers to a partner’s business. Its main cash volume however is syndicated or premium content, enabling users to access certain information or functionalities (on top of the basic they receive for free) if they pay the corresponding fees.
Here is where this lesson ends for today. We really hope you enjoyed this lesson too.
You will receive the next lesson in 7 days. Next week’s lesson will have the following title:
“Do You Know Your Web Words? Web 2.0 Jargon You Should Learn”
Copyright(C) 2008 by John Delavera & Reimund Lube
