Thursday, May 15, 2008

Proclaiming the second coming of Klondike

My friend Igor from Handy Mobility proclaimed the second coming of Klondike in a recent posting on his blog. His argument is basically that thanks to the huge amounts of money that Google, RIM and others are throwing at mobile software developments these days it's gold rush season for mobile developers. Sayeth Igor:
"More young developers will dive into mobile. Another chance to create apps that are actually useful, without having to figure out a business model right away."
Ah, say what, again? Without having to figure out a business model right away? Good idea, really... I had thought we all learned our lesson from the bubble:
"A combination of ... widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, focusing on increasing market share at the expense of the bottom line."
If you look closely most of the currently hip Web 2.0 sites are doing exactly the same thing. Yes, most of them aren't doing too shabby but at the same time I don't see YouTube, Digg, Facebook or whatever rolling in the big dough. None of them have been too successful when it comes to monetizing those eyeballs. Their main asset, their only asset, are the millions of eyeballs looking at their content. Therefore the main income of most of these sites is advertising. However there are only so many ads that you can display before people start migrating to other sites which means that you're losing your only asset. This in turn leads to the value of your business going down the drain.

Now, why do you think Google is spending so much money on the mobile market in general and Android specifically?

They want to increase the number of eyeballs looking at their ads.

Google has realized that there's only so many ads that you can squeeze into the currently available Web content. Turn it up a notch (or and people will start looking for alternatives. (Ever wonder why there are no ads on the Google frontpage even though at first sight this would make them a load of money?) For this reason Google is looking to tap a relatively untouched market: the mobile sector.

At the end of the day the company is betting that you will put up with a certain amount of (Google) ads in order to use services and applications running on the Android platform. Good for you, good for the people designing the service/application, good for Google. Now that's what I call a business model. However I'm not so sure whether this business model will also work for the people developing the services and applications. After all it's one thing to have an ad displayed on a Web site when you're sitting in front of a computer. But it's something entirely different to have to put up with ads on your mobile phone. I dare predict people are going to be significantly less tolerant there. So in my humble opinion people and companies will have to come up with another solution on how to make money with their mobile services and applications. Again, that's what I call a business model and without one I see little chance of anyone achieving sustainable success.

Now, here's an idea that I'm convinced will make tons of money down the road:

Develop a platform independent Adblock that runs on Android, Symbian S60, iPhone, BlackBerry, etc. and sell it for 10 bucks a pop.

How does that sound for a business model?

P.S. Igor, I briefly thought about sending you a link to this blog entry but knowing you there's a Google Alert set up for keywords such as Igor Faletski, Handi and mobscure so I'm certain that you'll read these lines quite soon... ;-)

4 comments:

igorskee said...

Friend, you know me all too well =)

See, the Twitter business model is unclear after almost 10 million dollars down the pipeline, yet it's an exploding service that made a lot of difference.

After running Handi for over a year John and I found that to make a sustainable business many exciting ideas have to be thrown away. The argument I am making is not against smart business, but in favour of advanced prototyping paid for with deep pockets of Google, Apple and RIM.

Plus, there is always the hope of getting acquired by a bigger service that already learned how to make money ;)

ChristophD said...

"See, the Twitter business model is unclear after almost 10 million dollars down the pipeline, yet it's an exploding service that made a lot of difference."

Twitter's impact is limited to a very geeky and tech-savy group of people. (And yes, I know that both the Obama and Clinton campaign are also using it these days. But guess who they want to appeal to?) The overall population lives on happily without being aware of Twitter. As cutting-edge kind of people we often tend to overestimate the impact of technology or online-services we use.

"After running Handi for over a year John and I found that to make a sustainable business many exciting ideas have to be thrown away."

You know what, I know that it doesn't sound as sexy as Web 2.0 multimedia location-aware community Mashup but how about someone come with a great "to-do list" application and service that runs on mobile phones, computers and in the "cloud"?

I can't believe it's 2008 and the best way to actually get things done is still using Post-Its... (Yeah, talk about the paperless office!)

"Plus, there is always the hope of getting acquired by a bigger service that already learned how to make money ;)"

That's exactly what every Web 2.0 outfit out there hopes too... Selling your business before you run out of the deep pockets money and before people notice that you don't have a business model. (*cough* eBay & Skype *cough*)

igorskee said...

Let's continue this over beers here in Vancouver =)

(Skype has a great business model, eBay overpaid but that's a different story)

ChristophD said...

Let's continue this over beers here in Vancouver =)

I second that motion...