Is Web 2.0 Sustainable? What business models will work? That was the topic of our panel discussion today at MIX08. We had a diverse panel; Robert Scoble (Fast Company), Kevin Rose (founder of Digg), Dave McClure (500 Hats blogger), Ryan McIntyre (Co-founder Excite, VC at Foundry Group), and Kimbal Musk (CEO at Me.dium).
The panel ran about 90 minutes and covered lots of topics. Some of the highlights for me were;
- Kevin Rose, founder of Digg, said it is all about the community, listening to them and providing a great service. When Jason Calacanis was at Netscape he offered to pay top Digg contributors $1K per month to submit stories at Netscape. Community was stronger than money. Nearly everyone stayed and Digg has continued to grow.
- Pownce, Kevin's new company, uses the Freemium business model. Free to use the basic service, but pay a premium for additional services. My survey of companies using the Freemium model showed an average of 3% of users will pay for premium services. Pownce is seeing the same conversion rate, and building a profitable business.
- Robert Scoble said the transition from blogging to video was easier for him because he has access to interesting people doing cool new things. Scoble sees thousands of channels focused on small topics versus just three channels when we were kids. Robert said search engines make it easy for the audience to find your video when and where they want it.
- Facebook apps can easily attract a million users. But, Dave McClure says they can easily lose them too. The best opportunity for Facebook Apps are focused on vertical markets like autos, movies, restaurants, and travel. The intersection of community and commerce is the sweet spot.
- Ryan McIntyre is a founding partner at Foundry Group, along with Brad Feld and several others. Ryan has made some great investments over the past several years. Postini (fee per user/per month), SlingMedia (hardware, no subscription), and Feedburner (free to users, but ad supported on feeds). Ryan looks for multiple revenue streams with high potential or leverage effects. They will invest from $500K to $10M, all early stage.
- Me.dium is creating a new social browsing experience, and in the process, a whole new advertising model based on real time click stream data and social patterns. The challenge is to create a great user experience while also delivering relevant advertising. If they can find the right balance it will be a huge financial success.
- Can an advertising supported business get to $25M in revenue? Jeremy Liew at Lightspeed Ventures calculated that it would take 833 million page views at $2.50 CPM to generate $25M in revenue. How many web sites generate that kind of traffic? The panel said very very few.
- How does privacy factor into this? Kevin Rose (Digg) said they try to be very open and explicit about how click stream data will be used for advertising, but totally protective of personal information. Robert Scoble said privacy is dead. There is no privacy, and the younger generation doesn't expect any.
- The consensus of the panel was that advertising is a good model if you have huge traffic that can be targeted, but all businesses should have multiple revenue streams. Freemium, subscription, pay for leads, and CPA (cost per action) are the most promising business models.