Wednesday, April 15, 2009

Social Networks: Works of art or businesses?

Are you a business or an artist if you don't have sales or marketing functions that actually create revenue?, the largest travel social network by a country mile is about to relaunch their website - branding, business model, the whole kit and caboodle.   Presumably as a result of their struggles to make a decent return on their huge audience (15 million members) and some slowing in growth.  The focus on rebuilding the business model is a clear sign of the times and of common-sense returning to the market.

For me, the most interesting change within this announcement is the focus on building a highly targeted advertising network based on travellers answer to the question:  "What are you up for doing?".  Now, since they scrapped subscription fees, WAYN has been a site which like many others, has relied on easy (but crappy) money via the old affiliate / adwords / display ads revenue sources.  What we are seeing here is, thanks to the economy, a more realistic approach to running a business.  One that realises the most important function to insource is the bit that drives revenues.  They are focusing on driving user content and intent that is directly relevant to paying advertisers and they will presumably (hopefully!) use a sales force to sell these advertising opportunities.  If so, they will be following in the wise footsteps of who long ago made the decision to insource their contextual advertising rather than relying on adwords (and they are about the only social network I can think off with a great revenue model).

This is my point, how can you call yourself a business if you are not fully in control of your revenues?  Any entrepreneurs out there ruminating a new start-up need to be aware that they're going to have to get their hands dirty and do a bit of old fashioned selling.  Unbelievably, I've met a couple of entrepreneurs recently in the London tech scene, who have founded community sites with fantastic traffic (200k - 600k per month) who have absolutely no interest in making it pay.  In the words of one, who runs a successful local listing site: "It's going ok I suppose, we've got great traffic growth but we're struggling to get the small businesses on the site to pay."  He goes on, "To be honest, I'm not really interested in the commercial side of the business, building a sales force, I just like building cool applications".  Is this not the attitude of a high minded artist than a businessman?

So any web startups out there ask yourself, "am I asking any of my users or suppliers to pay me, if not why not?"  In most cases I suspect, it will boil down to a reluctance to do the grunt work.  With the drying up of investment funds to support the "growth now, revenue later" businesses, I suspect they are going to have to start getting their hands dirty sooner rather than later.


darwinw said...

Great article! I guess I'm an artist based on your category :P I think you're spot on on "growth now revenue later", because that's exactly the strategy we're employing last year when we launch TripnTale and now we're scrambling to find ways to get revenue other than advertising or venture investments.


OO said...

Good post.

I tend to believe that most people like to portray themselves as artists in the beginning but end up business like. Honestly, nothing is free and a healthy flow of revenue is needed to keep the best staff and resources around.

We started out as social movement Outskirt Outreach in Malaysia but as we pledge help to more poor aborigine families, we struggle to keep our promises. This forces us to grow and take our quest to higher levels. Gone were the days when we do things because they were what we "like to do". Nowadays, we do it because we "need to do". Finding a good balance is getting tougher.

I guess every organization around the world goes through the same predicament.


Dee Edwards said...

I think it's absolutely fine to prefer to spending your own time building cool applications, we're all different. (in fact I wish I could write my on java, but hey that's never going to happen).

Though of course if you want to have a business out of it, then you'd have to get someone else on board pretty early who was good at bus dev!

Rahul said...

While people may have different views still good things should always be appreciated. Yours is a nice blog. Liked it!!!