Economics And Business Model

The popularity of Web 2.0 has made serious consideration of what kind of business model it would be able to provide.  In the early days of the Internet, this was also the problem that has been presented by its critics with respect to economics pointing out that there is no sustainable business model for the Internet.  However, since then, companies like Google and Yahoo which drive their revenues purely from advertising has proven such a business forecast false.

Web 2.0, however, because of the different structure it has of sharing and collaboration other than information retrieval, is also criticized by many as what kind of business model could fit.  Because of the fact that it is content driven, most of the websites and the contents are made by users and companies would not be able to advertise directly to those pages as in traditional methods of selling specific goods and services.

Understand that the highlighting points of Web 2.0 are we keys, blogs, social networks, file sharing, and a host of other user generated content.  Being a nonmonetary model of business, individuals are wondering whether or not such companies which focus on collaboration and user generated content would indeed gain profits.

The success of face book is only one of the various answers to such a problem.  Face book in just a few years had gained a net value of $22 billion outweighing in valuation most of the most popular online sites where advertising is controlled.  How is this so?

Understand that the basic business model of Web 2.0, like the traditional way of the Internet, is still advertising.  However, it is now targeted advertising through making use of keywords and search engine optimization.  Note that in blogs and social networks, there are sometimes small bars in the side with specialized advertising which are designed not to be intrusive to users who do not want them, but easily findable to those users which need them.  Organizations and other startups focusing on Web 2.0 collaboration technology may take advantage of such a model because of the popularity of such websites.

In fact, this is the reason why more and more bloggers today are leaving their full-time work in order to blog full-time to the use of assisted advertising methods that they integrate within their websites.
One way to describe Web 2.0 advertising architecture is through labeling it as social commerce and social shopping involving user generated markets where individuals may be able to set up shops located online and link them to other vendors sites which in turn pays such blog and social network owners as a method of sales promotions and direct it advertising.

Economics and its science is now shifting its academic focus towards research on the valuation implications of such social commerce and social marketplaces of having buyers and sellers online rather than located in traditional marketplaces.  This is being spearheaded by economists and researchers in the business school of Columbia University and the results would be published soon.

Bruno Auger

Tags: academic, social networking, Web 2.0, blogging, business, advertising