Amid all the to-and-fro’ing on Techmeme about Twitter and its lack of a business model comes a post from Jason “Mahalo” Calacanis, in which he tells us the secret to building a business model in Silicon Valley. Is it a vision of where the market is going? No. Is it a compelling service with a unique value proposition? No. Is it a twist on some existing service that makes your offering a killer app? No. You have to be “a player.”
In a nutshell, Jason appears to be saying that certain people — such as Twitter founder and former Blogger co-founder Evan Williams — don’t have to have a business model, at least in the traditional sense that their company actually makes money. They just need to build traffic and users until they are so gigantic that someone either buys them or they can create a business based on their huge user base:
“Running a startup is NOT about revenue anymore–it’s about critical mass. It’s about scale. When you’re playing in the big leagues with unlimited access to capital you shouldn’t worry about revenue BEFORE you have critical mass.*
* Note: if you’re not a player like Ev, and you don’t have unlimited access to capital do not take this advice and focus on building revenue streams.”
So there you have it — Business 101 from Professor Calacanis. Is that the approach Jason is taking with Mahalo? If so, I wish him luck, and I hope that he has “unlimited access to capital,” which strikes me as a somewhat unlikely condition for anyone (except maybe Bill Gates) to find themselves in. In any case, there’s a refreshingly contrary opinion from Don MacAskill, founder of the successful image-sharing service SmugMug.com, in the comments on Jason’s post. Don says:
“I have unlimited access to capital, but I still focus on building my business first and my scale second. The “scale first, then find a business model” route only works as long as you’re in a bubble, like we are now. But if that bubble bursts before Twitter both gets to scale and finds their business model, they could be in big trouble.”
If I were Ev Williams, I would pay a little less attention to Jason, and a little more attention to Don. In other words, focus at least part of your energy on building a sustainable revenue model — or even the seeds of one — now. Don’t put it aside and hope that it will magically appear later. And don’t listen to your Uncle Jason when he tells you that you’re a “player” now, and so you don’t need a business model.
I know that the impulse behind it is a valuable one, but I just can’t seem to get excited about the launch of the Business Blog Council, or what should probably be called the Big Business Blog Council. In fact, my thoughts on it run pretty close to Dave Taylor’s — it sounds like a gigantic waste of time to me. Don’t get me wrong, I’m all for businesses getting with the social-media program. But I don’t think getting a whole bunch of gigantic corporations into a room together is really going to help.
I really want to like this idea. Lionel Menchaca of Dell is a super guy — we had him on a panel at the last mesh and I really enjoyed meeting him — and he really gets what social media is all about, as his post on the Blog Council shows. But even if businesses need a secret clubhouse where they can share ideas about blogging, which I’m not sure they do, I still don’t see why it has to just be for big businesses. Why not all businesses?
I know, I know — people keep saying that businesses like Coke and Dell and Cisco have different needs because they are bigger. But I’m not sure I buy that. What difference does it make whether you have 100 employees or 10,000? Both companies will still have to think about disclosure and legalities and all those kinds of things. Much as it pains me to admit it, I think Scoble is right — just get out there and start doing it.
The biggest risk with something like the Big Business Blog Council — apart from it just reinforcing how big businesses don’t really get it, as Mark Hopkins points out at Mashable — is that it turns into something that starts with the word “cluster” and rhymes with the word “duck.”
The San Francisco Chronicle has a story about blogs as businesses, featuring comments from Mike Arrington of TechCrunch, Lisa Stone of BlogHer, Jon Callaghan of True Ventures (which is an investor in Om Malik’s GigaOm.com), Nick Denton of Gawker, John Battelle of Federated Media and Brian Sugar of PopSugar.com — the latter being one of the most successful blog networks, but not one that gets mentioned much because it’s mostly aimed at women.
Although there isn’t a huge amount in the story that we haven’t read in previous profiles of Mike and other professional bloggers (including one in BusinessWeek, which featured the infamous photo of Mike lighting a cigar with $100 bills), there are a few tidbits, including the fact that TechCrunch now has a full-time staff of eight, it and various related blogs get 1.2 million visitors a month and the company makes about $240,000 in revenue per month. According to Mike, he has also walked away from four venture capital deals because:
“Every time we almost did a round (of financing), we grew so fast the terms didn’t make sense anymore.”
Nick Denton Of Gawker.com, meanwhile, does his typical modest-mouse routine, in which he argues that blogs really aren’t that great and while a few people might be scratching out a living he doesn’t see it amounting to much:
“A few self-sustaining blog media businesses do seem to have emerged… but they’re still minuscule by the standards of traditional media. And none have weathered a downturn. So it would be unwise to sound too triumphant.”
But my favourite quote of all goes to Brian Sugar, who has turned a blog he started with his wife into a network of 11 covering everything from fashion to health, with a staff of 56 people and five million visitors a month. Sequoia has invested $10-million and NBC has put in $5-million. Does Sugar want to sell? No. Why? “This may be a weird answer,” he said, “but I’m having way too much fun.”
One of the sure signs that something is important is when opinion on it keeps ping-ponging back and forth, between those who say it’s irrelevant and those who say it’s the best thing since cheese in a spray can. And if there’s anything that draws that kind of polarized commentary, it’s Second Life. This week alone, we had a story about IBM’s embrace of the virtual world, and Darren Barefoot’s hilarious send-up, Getafirstlife.com. And now the BBC is planning its own Second Life for kids.
Meanwhile, Clay Shirky teamed up with Valleywag to pore over Second Life stats and conclude that the whole thing is overhyped, and there was a recent announcement that Second Life was going to open-source the software interface to the game. And virtual millionairess Anshe Chung claimed copyright infringement after being attacked by giant flying penises.
Is Second Life a joke? Yes, in a way. Not only is it weird to be flying around in a blocky universe (let alone the penises), but it’s a little goofy that people try to promote the business aspects of the virtual world while sporting avatar names like ePredator Potato — the name of IBM’s Second Life evangelist. And yet, there is clearly something there. No doubt many people thought the idea of uploading videos was a joke too, or using the Internet as a phone.
Ethan Kaplan is right, there are still issues with Second Life (Webomatic has had some too), including lag and other problems. And Valleywag’s informant is correct that the financial side is closer to a pyramid scheme than a real business. But those issues will be fixed — if not by Second Life, then by someone else.
I came across a post that made some good points on (where else) Second Life Insider. Everyone likes to talk about how Second Life is dumb because, well… it’s virtual, instead of real. So if you talk to someone on the phone, is that real? Of course it is. How about if you message them using MSN? So why isn’t chatting with them while flying around in a video game just as real?
There have been several reports — which Mike Arrington of TechCrunch summarizes here — that Google might be looking at turning Google Earth into some kind of virtual world a la Second Life.
Herewith, a roundup of recent Second Life-related news events, as the virtual world continues to get more “real” (for better or worse):
- The Economist has a long piece on Second Life, including a fascinating tale of a psychology professor who set up a place in Second Life where his students could experience something akin to schizophrenia firsthand.
- Professor Charles Nesson of Harvard Law School recently held his first class in Second Life as part of an online-only course called “Law in the Court of Public Opinion.”
- IBM recently held an alumni meeting on the island it owns in Second Life.
- CNet has launched a presence in Second Life which consists of a virtual replica of the company’s offices in San Francisco, where the news agency says it plans to interview both real and virtual people.
- A Swedish online dating company has made the natural leap from dating site with photos to Second Life dating world with avatars.
- Scottish girl-rockers The Hedrons are the latest to put on a virtual gig inside Second Life.