As those who lived through the first dot.con bubble know, the way to make money was to come up with an idea and con “investors” to throw buckets of cash at this amazing new e-thing. Nobody worried about making money because amazingly in the e-world, profits miraculously appear down the track.
And we all know how the dot.con bubble ended don’t we?
It’s the same principle driving many of the “start-ups” today. Same process – just a funky new buzzword for launching a risky business. How lame does it sound to say you’re opening a new company? It’s much cooler to say you’re launching a “digital start-up“.
You carry even more swag if you are “crowdfunding” or “crowdsourcing” your start-up – WOW, just writing it has an aphrodisiac effect!
But just as they did in 1999, the start-up owners have no plan to turn a profit any time soon, except from selling part of the start-up shares to investors. Many of these ‘business models’ are based on getting lots of users of free platforms – think Twitter, Yelp, LinkedIn et al.
The money will be made down the track by selling advertising based on the volume of users. Just like magazines and newspapers did for centuries. Although people have always paid a cover price for most print publications. But as news is now free online, paid publications are struggling.
The mistake here of course, is to believe users behave like customers and regularly return to shop. Therefore advertisers will be willing to pay to reach these users when they return.
The world doesn’t need any more “opportunities” in which to advertise. So why do these digi-people believe advertisers should make them rich? Why not create something of worth that people will buy? After all, most of their users would not pay for these social platforms if they cost money. One of the major reasons people use them is simply because the service is free.
And financial analysts are now rethinking some of these user-based businesses. On 30th April they took a dim view of the user-based platforms Twitter, Yelp and LinkedIn:
- Twitter share price dropped 25+%
- Yelp dropped 23+%
- LinkedIn dropped 20+%
Read about it here.
As a result, marketing blogger Mark Kolier questioned Twitter’s value as a marketing channel: “What if Twitter isn’t an effective marketing platform?“.
So I ask the question:
Is Twitter the next Myspace?
As regular readers know, Twitter is failing to attract brands in significant numbers. Looking at how it is being used, I suspect it will go the way of Myspace – becoming a niche player. In Twitter’s case a service for vacuous celebrities; movie, TV, music and sports stars/shows; emergency services; journalists; public relations executives; government services; the odd data consultancy and some customer service departments.
Twitter probably won’t survive as a marketing channel for brands – particularly as it still hasn’t made it as one. It is a reasonable channel for individual consultants and publishers to promote themselves, but not for major brands.
You may disagree dear reader – but unless Twitter can become more relevant to big brand marketers and grab more revenue in a crowded advertising market, dominated by Google and Facebook, its future may not be in its own hands.
Lots of users, not lots of business.
And you can retweet me on that…