It's a black swan in the size it grew to, but not in the fact that the founders didn't have the business model figured out when they started. That's more common than not, if you look at recent web startups.
Just about any of the social networks that were "the next big thing" except for Facebook and Myspace. Friendster was the first social network I joined, was massively popular, and now seems pretty moribund.
They didn't die of not figuring out a business model, though. They died of ceasing to be popular. If anything these examples support my case for the primacy of getting lots of users.
a lot of aged web companies seem moribund. You could say the same thing about geocities. To tweak PGs question a bit, can you think of any sites that got massively popular and didn't have the opportunity to make a ton of money?
I see your point. This is the classic business mindset.
I would venture to say though that the classic rules can be broken for other considerations because the Internet is a new medium.
I will get to other considerations in a minute but the main thing to understand is that the Internet breaks the old rules by lowering distribution costs.
It makes sense to delay monetization if you have a compelling user proposition that can be scaled quickly through word of mouth(ebay,youtube,flickr) or by partnering with an 18 wheeler (google,paypal,skype).
The assumption here is that if you build a large user base it takes a very small number of paying users to make money.
Its easy to see that in each case there is a real value proposition. In fact none of these applications would exist except on the Internet.
Although some rules have changed, the old rules still apply i.e. building something with a real value proposition and then distributing it without breaking the bank.
Those that failed did not create real value in the marketplace not because of monetization.
Right, but nobody said that it does. The point is rather that if nobody notices what you're doing, you don't even get to the point of dying because of a bad business model.
somehow this has splintered into an "business model vs. traction" agreement - in fact you need both. It will not kill a programmer to spend some time running a few models on how they can actually monetize the service, just as it is not beyond the scope of any biz/marketing person to understand that building something users want is job #1.
where many people stumble is thinking in one dimension terms, like assuming Adsense is a business model (see recent posts by Josh Koppelman and Jeremy Lui) on just how big you need to be for this to be truly viable.
What I liked in the original article is that it offered a few, less obvious options for monetization.
Some of the articles' suggestions were good ones. And yes, you should always have some ideas for how to monetize your business. However, one key problem is that if you try to implement a monetization strategy before you build a user base and really understand who shows up at your site, your monetization could be completely wrong.
Consider the following possibilities: your user base turns out to be very broad-based and large, your user base turns out to be smaller, but a significant percentage of them is from a particular demographic or vertical, or your product turns out to be most interesting to other businesses or other websites that want to integrate what you built into their own businesses. Each of these scenarios implies a different approach to monetization.
Given the way your understanding of a market can change as you actually meet the real people who use your site, a change in targeted user base can happen to a lot of different businesses. And if you spend too much time up front working on revenue, you may end up throwing all that work away when you confront the actual opportunities that present themselves.
For some businesses, you may have a precise understanding of who your customers are going to be in advance, and then that turns out to be exactly who they are. If that works out for you, cool. But my guess is that that's not the most common scenario, especially for a website.
