This started off as a script for my talk at the upcoming BarCamp Delhi [register here] to be held on Oct 11-12 at IIT, New Delhi. Before we proceed any further here is a really motivating video about the whole Web 2.0 movement, and yes, it is a movement, an uprising, and nothing short of it[whole story after the jump].

All online media, as well as most of offline media, has the following entities to the heart of it:

  • Content Creators
  • Distribution Channel
  • Community/Audience

Armed with those three points, we take a dive.

Web 1.0: At the very beginning, that is the beginning of the Internet, there was too much consoling on consoles, very nerdy geeks[read gates and jobs] having fun with computers as they were and just cooking up things that made the thing more and more usable. Then we had all the operating systems and hardware platforms we would ever need, really.

Now those were the days of infancy of big corporations in the computing industry and they showed no signs of amateurishness whatsoever. Bill Gates is the richest american for fifteen years in a row, so the seriousness we are talking about here is beyond grasp. It was clearly visible by how they fought Netscape, a pretty innocent startup, that took the very first step in a never-to-die-down uprising. An uprising that is less surprised than its participators. Participators, who often have found themselves at the receiving end of this uprising. Netscape offered to provide, eh, documents(??) online. How innocent? That was the first browser that could display images inline with the text and with the help of some more wizardry that made this revolutionary new browser technology usable, it caught the fancy of the world, wide, web.

The social media here were the HTML documents. The creators were those few nerdy elites who knew something as exotic as HTML. So when we had the distribution channel in place and the creators were excited to create the very first form of social media that the world would know, Microsoft found something wrong. If the channel was let go of, Microsoft would lose monopoly of the very thing it built its empire on, the desktops. Whatever be the case, this uprising was muted, although for some time.

So the social media was there, the creators were in place, and the audience was present as well, but the distribution channel got choked. The users have been denied something that they could have had.

All is never lost. Just when the industry was making big money on this very nascent computing technology and the newest marvel of it, the Internet, lightning struck on the other side of the hamlet. Napster was born, and what a birth. This time the blow would hurt even deeper, like it always does. Napster allowed anyone to get a song he/she liked from any part of the world in minutes, for free. Wow. So the new social media is a song, revolutionised by a new technology called MP3 which renders a song file very transferable over computer networks of the day. The creators of this new social media are the industry signed music artists, very prized possession of the recording labels. And we know the size of the audience who are into music, its huge. Napster was the distribution channel and bang, again, the industry finds something wrong in this. Don’t you find something wrong here?? If I am a fan of something, I oughtta receive a souvenir for my faithfulness and not pay for it. And when someone does something that actually helps my faith grow, the very artists find it wrong?? Just doesn’t add up any which way I try.

Whichever way the jury settled, this was the birth of Intellectual Property Rights, patenting and much copyrighting around the world. Now everything gets copyrighted to the creator and the owner.

As an aside, and before moving on to the next generation of Web revolution, here’s another case:Sit to think about what has been the primary conflict with Linux?? It is the distribution channel. Its open, wide open. You can come in anytime and if you want to, you can just pick off one single application and leave. It was that much open. But due to the sheer size, and the fact that the creators and audience are both among us, there’s nothing much the industry could do. That is a very geeky kind of social media, but it lived on.

Web 2.0: So now, in the spirit of the video above, to hell with all artists. We have all the channels now to be the stars that we can be. Let Warhol take a class for fifteen minutes after which, we can start on our journey of claiming and entertaining our own audience. We have social bookmarking sites, wikis, video-sharing sites, blogging sites, picture sharing sites, social networks, microblogging, life streaming, virtual worlds, podcasting, webcasting, … the distribution channel has stopped looking like a wire or pipe and now looks like the world in itself. The creators are all of us. We have our copyrights. We are the audience as well. But wait. Copyright?? I am no Metallica, and neither am I Scott Adams, so who will steal my creation? And in an online population of 500mn people, if someone does, I won’t know. The chances are grim. Copyscape and TinEye may help, but what the heck, even if I find out, what are the chances that the discovery of such theft will be profitable for me??

Profitable.

If I was Metallica, I am only 4-5 guys in the whole world, and my copyright is heavyweight. It makes big money across oceans. The recording company better lookout for all infringements. But I am also a traveller sharing his pictures on the Internet just like that with the same kind of copyrights. But if my copyright gets violated, there’s not much doing on the way from my hosting service. I am not big money, my copyright is featherweight, or worse, pea-weight. The hosting service is still making money from the ads that result by way of pageviews on my picture pages and god knows how many in my audience click on them, but I am benefitted by none.

Is something wrong again?? Wrong is, the creators now don’t get paid for their creations. People have always wanted it for free, so what the heck, Mr Website Owner says, give it away on a web page with some mumbo-jumbo passed for copyrights and lets keep the dime with ourselves. Should I, the creator, not get a cut for the traffic my creations brings to the website I am hosting my stuff on?? Or shouldn’t the website proactively sue someone for violating the copyright on my creations, something that I have trusted this website with??

The Social Media has come a full circle, from the 90s, when you were only the audience, to the NOW, when you are the artist and you are the fan. So is your copyright holding it all together for you?? Are you being paid for the Intellectual Property that you are generating and hosting it with somebody?? I will leave you with questions here and continue on this topic sometime later, but will definitely finish it before I go in for the talk at BarCamp, where it is scheduled.

Out of ten people I know, atleast one has asked me how are social networking sites profitable. Out of hundred people I know, atleast one is trying to erect a social networking site and is desperately trying to answer this question. I am talking about the second most popular question on earth after “Where is God?”.

How are social networking websites making money?

If you are one who is trying to up a social networking website, I would like to share some gathered thoughts here about how one can monetize a social networking website and how one cannot, or if you know more, please use the comments section below, I am around and eager.

Userbase is money: NO. Yahoo has 500mn users, and if this were true, you would know more about Jerry Yang than some Brinn or Page or Zuckerberg. Having a hugely popular website is not going to get you rich unless you have a revenue model already planned into it. So get out of this mindset, as this is the first no-brainer that a sales guy will throw at you if you asked him this question.

I will put in Ads: I really don’t know which wise guy had this inundating brainwave of allocating real estate on web pages and charging businesses for the ads shown on them. This is not TV. I myself know, I haven’t clicked on a single ad till date, they are just not useful and they are not convincing enough. I am sorry AdSense, you are good, but I am sorry, in fact, ask tickle.com[the online IQ testing website] for some data about the users which came in from your ad clicks and how much was their IQ range, should be an eye-opener. Anyways, so people don’t read entire web pages from top to bottom, left to right, sequentially as if watching a TV, spending time with every commercial on it just because they can’t skip the commercial breaks. On web pages, people just navigate to the exact section and click. And with usability getting to ever higher levels and the content getting more relevant, users are almost hypnotized. You may find umpteen success stories about how per-click ad programs made people rich, but you have to find one yourself in this real world to be convinced, and you won’t find one[1].

I will have users subscribe by paying: I suggest take a stroll if this idea is doing the rounds in your head. Do only what you will be comfortable with if you were the user. This could only work if what you are selling is a product or some indispensable service or support. And yeah, don’t lame it up like this[2].

Those were the myths. On to the facts.

Micropayments: Good things come in small packages. Very small. Imagine putting in goodies that cost a dollar by the hundred, and now if you have the userbase, this is bound to work. This may not get you to the top of the Forbes list, but will surely be a steady source of revenue.

Merchandising: You just have to do a count of the number of websites cropping up that claim to get a customised t-shirt to you. I bump into such websites each day, twice. If you have anything else other than pictures to put up on t-shirts or mugs or teddy bears, this could be just the way to leap out of the screen. Although this might be costly, but margins will be high if done in volumes and shipping be within a manageable geographical area.

Revenue-Sharing: Google shared commission with people if they put up AdSense code within their pages. Microsoft is showering its resellers. The Facebooks/Bebos have to do this. The fancy of social networking websites has long gone and people are still using it because its as much a part of them as their email addresses. They are spending ever increasing amounts of time each day on these websites and are still not that much loyal to not consider switching to another site, a better and rewarding one. Its only a matter of time before most of these users come to know and believe that they are buying your lunch. And after that its another few moments before someone comes up who is willing to share his lunch and pay his users their share. I can’t tell you how to share your revenue with your users, totally depends on the niche and technology you are working on, but if you don’t respect the time and effort your users are putting in you might just find some rough times ahead. This is specially true for websites that are solely thriving on user generated content[3].

And as another observation, selling anonymized trends on your website to your ad partners is not a very creative way to go about earning money. I guess the next step would be to get businesses to users who just want it. Permission Marketing[4].

Whatever you do, don’t start without a revenue model as that speaks of zero business insight on your part, and secondly it is very tough to incorporate a revenue model later in a very much alive site[5]. The stories that you might be entertained with is how google and youtube and so on started without a revenue model and so on, and are making big money today, well, they started when internet was only a place to check emails[6], not some place where you shop, play, meet people, learn and almost live your life there. They started out of pure geekness and a need to solve the problems the creators were facing. In comparison RockYou did an exhaustive study of the market and came out with widgets which hit right on target and made RockYou worth around 400mn $[7] in under 2 years. Keep looking and you will be convinced more and more of having a revenue model.

Quoted from What does the “Media Business Model” mean?[also contains an exhaustive list of all possible monetization methods]:

Both media and most online businesses are based on “software economics”, where the cost of creating something of value is relatively high but the marginal cost of distributing it to each consumer is very low.