Saturday, April 04, 2009

This is so true - Non value web 2.0 companies (most of them) via tech trader daily post

"Lindsay thinks social networking companies, in fact, are largely un-monetizable. In the case of Twitter, he says the obvious way to make money would be for users to pay a subscription fee, or to accept unsolicited tweets from advertisers. “If that happened,” he contends, “the user base would evaporate about as quickly as radiator coolant in Death Valley.” It’s not that he doesn’t like Twitter as a user; Lindsay just thinks it will never have a viable business model.
Indeed, Lindsay comes close to calling the entire Web 2.0 company-creation mechanism something of a Ponzi scheme. (Though he doesn’t actually use the term.) “Typically after a few years of growing users, a social network start-up’s venture funding runs short,” he writes. “Because there are no revenues [there] is no way the owners can persuade the financial markets to fun an IPO. So now there is the problem of how the original venture capitals are to be paid.”

The usual answer, he says, is to start calling around to Valley execs to sell them on “the latest and greatest thing on the Web,” complete with hints that the potential acquirer’s business is “looking a little tired.” And before you know it, he says, you have a deal."


Anonymous said...

I think cisco would have been better served paying a dividend than overpaying for Pure Digital, in which AllianceBernstein invested and gained significantly.

What a load of hypocrisy.

These guys understand the Valley hype / ponzi machine better than you or I.

lilyruth said...

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Anonymous said...

Interesting article. I agree

Anonymous said...

true. true