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The curse of the platform or advertising is not a business model

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I must agree with Alec’s post Twitter Business Models / Calacanis is Bonkers? where he calls Calacanis barking mad crazy for talking about in feed advertising and SMS advertising for Twitter. I am surprised that in this day and age anyone would consider advertising a long term, or even medium term, way of making money online. I can only hope that Hugh was being deeply sarcastic.

Sayz Alec:

At best they may maintain some control over their half-life – how long it will take to lose half of their users, and then half of what remains – but decay is inevitable and will be rapid. Maybe they could milk some cash out of it on the way down, whilst they are pissing-off their userbase? Not a good plan for growth…

Indeed, especially as Calacanis believes in scale and this underscores his recommendations to Twitter.

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.

Here is industrial age thinking translated into online environment. And true enough, to the extent that the mindset still rules our behaviour online. But there may be another way, in the ‘channel world’ scale is in aggregation. In the networked world, scale is in distribution. That is why people from the former build platforms, people from the latter build applications that help distribution. It is not platforms that are bringing the media industry to its business model knees but P2P-eed teenagers, networked bloggers and applications that increase the individual’s ability to produce, share and distribute.

The curse of the platform is that although it may initially bring users value, as time goes on it is hard to sustain, let alone make money as the cognitive dissonance about who your real customers are increases with time. At the start, when building a platform, the platform owners consider themselves, or at least behave as if, serving the users. But the moment they decide to start placing adverts or otherwise ‘monetise the eyeballs’, their real customers are the advertisers. There’s not many of them wot gets it:

Craigslist had been approached about placing text ads on the site. “We’ve had the numbers crunched for us,” he said. “The numbers are quite staggering.” But, no, the site wasn’t interested. “No users have been requesting that we run text ads, so for us, that’s the end of the story,” he said to the befuddlement of the crowd. “If users start calling out for text ads, we’ll listen.”

Another unspoken question presents itself – Is making x gazillion $$$ within a finite amount of time a business model? Or is an exit strategy with $$$ in the bank a business model? Both are certainly a way of making money but a business model is something more fundamental. It is about creating a way to create value, to maintain and grow it. The aims is to make enough money to keep doing just that. I don’t see much of that in Web 1.0/2.0. But I may be old-fashioned like that.

799px-sydney_opera_house_in_sand.JPG One of the statements that made my heart leap last year is: Advertising is a form of censorship. The Web of 2007 is a house built upon sand. But more about that later…

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4 Responses to “The curse of the platform or advertising is not a business model”


  1. Perry de Havilland
    on Jan 3rd, 2008
    @ 1:11 am

    “In-feed advertising”…WTF? That has GOT to be a joke! One of the reasons a lot of people read-by-feed is precisely to AVOID the annoying fucking advertisements!


  2. Stephen Reid
    on Jan 3rd, 2008
    @ 9:38 am

    Well yeah Perry, which is precisely why advertisers want to pop up in there. You cannot hide from ads as long as they want to advertise…

    To paraphrase Futurama, they had adverts everywhere back in the 21st century – except in our dreams. (That’s coming in the 24th.)


  3. Alice Bachini-Smith
    on Jan 3rd, 2008
    @ 23:41 pm

    I really like your distinction between business model and exit strategy. Even people climbing greasy poles with expiration dates on them are going to need something to do when it’s all over. Never too late to start investing one’s energies in something of real value, I say.


  4. Digital Nomad | links for 2008-01-04
    on Jan 4th, 2008
    @ 1:29 am

    [...] The curse of the platform or advertising is not a business model : Media Influencer [...]

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