Popularity vs profit of website operation mode

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After the dotcom bust, the lessons of venture capitalists have become wary of investing in entrepreneurial schemes that do not have a clear profit model. Waves of sand, many similar pets.com, Webvan such a poorly conceived companies have been eliminated. Emerging internet start-ups need a clear profit model.

There is a rainbow after the storm. YouTube, a popular video-sharing site, was bought by Google in 2006 for 1.65 billion dollars. Convince some risk investors that the site has a large number of users that are more valuable than profits.

But now, as the global economy enters a severe downturn, the test of the two Web-site operations is starting to start again.

The two-mode duel is being staged in the micro-blogging arena.

Player A, Twitter, a pioneer in micro-blogging, is now a household name. Has at least 3 million users. But there is no earnings--not even advertising revenue.

Players B, Yammer, the new microblogging field, focus on corporate customers, there are only 60,000 users. Unlike the founders of Twitter,yammer, they started offering fee-based services. And after 6 weeks of creation, there is not too little cash income.

Since its inception in 2006, Twitter has put a lot of effort into technology to provide better service to users.

When a user logs on through the Web or a mobile phone, Twitter asks a simple question, "What are you doing?", and users only need to answer with 140 or fewer characters. Messages posted on Twitter are as deep as haiku, and some are very simple, such as "Go Out Tonight" or "itchy eyes, too depressing".

Yammer asked, "What are you doing?" Its CEO, David Sacks, explained that the purpose of the question was to make the job more efficient. Users are updating their colleagues ' status on Yammer, or consulting work-related issues, which is more straightforward and effective than e-mail.

Sacks said Yammer's first task was to find a way to make a profit, as he had learned when he was coo in PayPal, when the dotcom bust coincided with the need for PayPal to get revenue as quickly as possible. His focus on profit helped Yammer win the best entrepreneurial project of the TECHCRUNCH50 Congress this year. The organizers of the conference, the famous Science and technology news blog TechCrunch called Yammer "business model of Twitter."

Sacks says the Yammer business model is compelling because it is as fast as consumer services, but as profitable as business services. Anyone with a company email address can use Yammer for free. The company can become a full member only after paying 1 dollars a month for each employee. By becoming a full member of the Yammer, managers have access to more security controls and information on how employees use the Yammer service.

In the first 6 weeks, 10,000 companies (with a total workforce of 60,000) became members of the Yammer, although only 200 companies (with a total staff count of 4000) paid for the current position.

It has also been reported that Twitter has raised 20 million of billions of dollars from risky investors, but its founders and sponsors still insist on the original decision that the primary goal is development and that profitability is second.

Like the telephone network and the Internet, Twitter's value increases with the number of users. So increasing the number of users is the top priority for Twitter, says Ceo,evan Williams of Twitter. "If we start thinking about how to make money at an early stage, then we don't have the extra energy to improve the quality of our products," he said. "Over the past year, Twitter's user enrollment has increased by 600%."

However, when venture capitalists advise startups to cut jobs and make a profit so they can survive the recession, profitability is a new problem that Twitter urgently needs to solve.

Just in Thursday, Twitter's board decided that Twitter founder Jack Dorsey resigned as CEO and was taken over by the Twitter board chairman and more management-experienced Evan Williams. "We agree that Williams is better suited to lead the company, whether it be from the long-term development of the product, the operation of the business or the business stance," said Fred Wilson, a member of the Twitter board and Ventures partner of venture capital. ”

Twitter plans to introduce several revenue-generating methods early next year. One idea is to charge the company with plans to use Twitter as a formal channel to communicate with clients and monitor the content of their conversations.

While Twitter will focus on creating profits next year, Williams believes that "practice has proven that Twitter's growth priorities in the past have been effective." ”

Williams used to help set up Pyra Labs, an early blogging company that grew rapidly, but failed to find a clear profit path until it was bought in 2003 by Google. Williams also pointed out that Google is starting from the search engine, the beginning also did not have any income, until found the advertising this huge profit model, only to become a business giant. Williams said: "This is a classic case, you do not have to worry about making money, just to do the product well." ”

However, Joseph A. Grundfest, who once was a member of the Securities and Exchange Commission and now teaches venture capital at Stanford University, says most companies should not expect to get a Google-style success. He said: "In my opinion, you need at least one solution to achieve positive cash flow." ”

But in any case, the economic crisis could make growth companies like Twitter have no choice but to focus on keeping the bottom line. Paul Kedrosky, senior researcher at the Kauffman Foundation, said: "When you have enough money, you can decide whether to develop first or make money first." However, when there is no money, this is wishful thinking, you have no choice. ”