At MIX: Web 2.0 Business Models

About a week ago, Microsoft’s experimental MIX conference concluded after a three-day focus on new web and rich-client technologies (Ajax, Vista & WPF, IPTV & Windows Media Center). Openness resonated even in Microsoft’s hallways as many of the sessions were led by outside speakers, including even “rivals” (or not?) such as Yahoo. Having attended MIX, I found the following session to be most relevant in the context of Open Business: Show me the Money – Web 2.0 Business Models. Here’s the summary:

Panelists:
Tim O’Reilly, O’Reilly Media
Mike Arrington, Editor of TechCrunch.com
Jeremy Zawodny, Yahoo Search Technology Development
Royal Farros, Microsoft (formerly MessageCast)
Adam Trachtenberg, eBay Web Services Evangelism

Web 2.0 Punch Line:
Tim O’Reilly set the tone for discussion with his observation: in his view, there is a move on the web towards “information businesses that deliver software as a service, enable collective intelligence and user-generated content.”

Show Me the Money: Major Points

• Mike Arrington: You must give something for free
  The only way to retain attention is to offer something. Either the entire service is free or there is at least a free version of the product with reasonable limitations. All recently websites are an example of this.

  However, there is also a fine line for services with free and paid versions: Flickr had a good distinction that motivated people to upgrade from free to Pro Accounts; FeedBurner on the other hand gives away too much with too little incentive to upgrade.

• Pay for Use: Subscriptions, Transaction Tax, Microcharges with a broad mass market
  Despite previous web business models in which everything was forever free (storage, usage, etc.), more and more websites are coming out that charge subscriptions, pay-per-use or transaction fees.

  People are willing to pay reasonable amounts for a useful service. One of the best examples: 37signals and its suite of web applications (some of them are entirely free, others have free & subscription-based versions).

• The New Currency: Data, Data, Data (User-Generated & Aggregated)
  Tim O’Reilly: People are aggregating data at a fantastic pace, hoping that it will eventually make money (waiting for critical mass).

  Tangential question from audience: If someone has stored or aggregated your data, what happens if they start charging (you) for it?

  Follow-up question from audience: What other models are centered around data?

  Response by Royal Farros: “The more things change, the more they stay the same. The Answer: Advertising. It’s a 600 Billion dollar market.”

  Conclusion: Advertising will become more focused, more contextualized and relevant and Data is the single most important prerequisite for such future.

For more links and coverage about MIX, see our separate summary post of additional resources.