From TechDirt
Last week, in response to Clay Shriky’s wonderful look at journalism business models, I wrote a post about the fact that you can’t wait for the perfect business model. I was amused to find some comments pushing back on this — including one that specifically pointed out that Twitter and other social networking companies could never make any money. In response, I pointed to both Google and Craigslist as companies that were once in the same spot, but the commenter insisted that was ridiculous, because both had business models.
This is retrospective thinking. It looks back on things and pretends that it was obvious how Google and Craigslist would make money. It was not.
Craigslist was mainly a hobby for Craig Newmark for a while — and every part of it was “free.” It was only later that a business model was developed. And the situation was even more crazy with Google. I have admitted in the past that I never thought Google could make enough money to survive — and it was something I was very, very wrong about. But, at least I wasn’t alone. Howard Lindzon points us to an article from 2000 in Business Week fretting about Google’s ability to come up with a real business model. Business Week wasn’t the only one. I remembered a similar article in Wired, and just dug it up. It ran in October of 2001, and pointed to the huge dilemma Google had in proving to its VC backers that it was a good investment. Some quotes from both articles:
But how will Google ever make money? There’s the rub. The company’s adamant refusal to use banner or other graphical ads eliminates what is the most lucrative income stream for rival search engines. Although Google does have other revenue sources, such as licensing and text-based advertisements, the privately held company’s business remains limited compared with its competitors’. — Business Week
The dilemma? Behind the anti-corporate facade, Google is in fact a company – even worse, a venture-backed company – and these days that means it must find a route to profitability fast or risk failure. Given that its far more commercial competitors, from AltaVista to Ask Jeeves, have been unable to come close to positive territory (the one moneymaker, Yahoo!, started as a directory), Google’s prospects might seem bleak. — Wired
This doesn’t mean, of course, that sites like Twitter and Facebook will definitely find business models. But, it should give you pause before assuming that they can’t. Business models often seem obvious in retrospect, but at the time, it’s not clear at all. I wouldn’t put it past the team at Twitter to come up with something that works (I’m a bit less sure of the team at Facebook… but we’ll see).
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