the reflexions insider

(Image by nswlearnscope via Flickr)

Recently the ever-snarky tech/finance blog Silicon Alley Insider held a contest to propose how to fix what they called Digg.com’s “broken business model” (”broken” because Digg lost $2M on $6.4M in revenue, a staggering loss by any standard). The winner would have his or her proposal (and resume) delivered personally to Digg founder Kevin Rose and CEO Jay Adelson. The winner was Keith Cowing, an MBA student at Cornell, who suggested among other things that Digg generate revenue by selling sponsored posts on the home page and data to marketers about its users. Probably something Digg should consider but it’s hardly a revolutionary thought and not exactly the kind of model that will transform underperforming web 2.0 properties into revenue generators.

By and large the “web 2.0″ crop of business models has been disappointing. There are no shortage of examples. YouTube, purchased by Google for $1.65 billion, has a revenue model that’s “so secret, even Google doesn’t know what it is.” While Google doesn’t publish financial information about YouTube, its impact on revenue has been [...]

Consider this: Twitter didn’t exist three years ago. YouTube didn’t exist four years ago. And Facebook, the second most-visited website in the world on Christmas Day, 2008 (after Google), was started as a half-serious side project by Mark Zuckerberg in his dorm room less than five years ago. All of these websites were effectively created after the (now oft reviled) term “Web 2.0″ was coined by Tim O’Reilly and John Battelle in 2004.

By any standard, profitable or not, these are enormous web properties. And the timeline above demonstrates how rapidly the web landscape shifts and how fickle are its users.

Below I’ve identified several trends that I think will make an impact over the coming months and into 2010. This isn’t meant to be a “prediction” list per se, but an attempt at identifying how the current dynamics of social media will play out. Enjoy.

Twitter will launch a commercial subscription service that will generate revenue by letting companies use the platform to connect with customers. It will receive additional buyout offers but will remain independent for at least another year. I believe its investors are convinced that it’s worth more than their potential suitors think. And I believe they’re right. But having zero revenue is not sustainable.
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About a month ago, those of us who follow changes in Google’s search result rankings with a level of enthusiasm usually reserved for sports franchises woke up to something frightening: The Dewey Update.

Google normally makes daily changes to their search result rankings, so finding yourself in position 3 when you were in position 4 yesterday is not abnormal. But it was quite shocking for many webmasters to wake up one morning and discover their site completely removed from Google’s search results.

Google’s primary goal should be to deliver the best (i.e., most relevant) search results to its users. This is what ensures that users will keep coming back and what maintains Google’s marketshare. However, the reasons behind this update (although impossible to pinpoint) appear to be focused on ranking Google’s internal pages higher than others.

After the update, Google Books search results were suddenly ranking close to the ever-dominant Wikipedia pages. In addition, Youtube and Google News content was being displayed prominently over other commercial listings. This looks like a blatant abuse of Google’s position. Their mantra “Do No Evil” implies a commitment to being fair and balanced—manipulating search results to put their own pages first is clearly an unfair tactic that hurts both users and webmasters.

Fortunately, this update was short lived. After Google’s spin master continue >>