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Site, Software or Service - Which Are You?
Reading the America-Destroyer’s op-ed piece on whether we are in a bubble, I got interested in the seeming conflation between software and content sites. Here’s what got me thinking:
But I disagree that Web 2.0 companies cannot become sustainable businesses. The Network Effect is still the most powerful force driving Internet success today. People don’t, for example, go to Digg because it has great software. The original Digg, as launched, cost Kevin Rose less than $2,000 to create. Anyone can create a Digg clone, and many have. The reason Digg is, and will continue to be, successful is because of the community it has created. People go to Digg because everyone else goes to Digg, and every new user who submits stories and/or votes occasionally adds value to the whole network. The Network Effect is also driving Facebook’s success, and YouTube’s. None of these companies have interesting software. All of them have an incredibly valuable community. All of these companies have to work hard to keep their lead, but it is nearly impossible for new entrants to catch up.
OK, interesting point. Some of these “Web 2.0″ companies are not so much software or technology plays, but media destinations.
But as startups we ask, what kind of duck am I? I posit that a lot of us quack into one of three categories:
- Site: Destination where people spend time and attention, and in return receive content and/or participation in some kind of network. Google is a good example where they just provide content, and Digg would be an example where content is more of a two-way street. But either way, it’s about clicks and attention, and I think this kind of business acts like media in that it can reasonably be funded on subscription or advertising revenues.
- Software: A piece of technology to help someone accomplish a goal. People license the technology, and apply it in their own environment. The software could be hosted or internal, but essentially the onus of creating value is on the user, and the purspose of the technology is to help the user attain some end or achieve some value. As such, advertising does not support this model much, but license models, including (in some cases) subscriptions, do. I think the current iteration of Element55 is in this category.
- Service: As with all things, there is a gray area, and “service” represents a place on the continuum between the two above. A service employes a technology that helps achieve an end, and does not necessarily have an immediate draw on the user’s attention. The onus is on the service to deliver its value, rather than the customer.
This is a half-formed idea - there is subtlety around the idea of the software-based service, and the interplay with the five “P”s. Merely being hosted doesn’t magically make you a service. I need to think on this more, but there is definitely money in this middle.