Web 2.0 – A starting pitch…

Web 2.0 fundamentally takes how business uses its customers, partners, and their interrelationship. First any Web 2.0 should focus on bringing the web users together via network effect. For example www.flickr.com is a web 2.0 based website which is carefully engineered to get the network effect rolling in the right place for its partners and itself drive the revenue to the company. Collective user value is the key ingredient to make a Web 2.0 business a success. Network effect is brought in place by usually mixing the following with the right mix of certain ratio based on the focus of 2.0 product – freemium, web based sharing capability with a community around them, network effects. Freemiums are usually not that easy to obtain because strong source of revenue should back the funding required. Some of the freemium business models have become very successful, like Adobe Acrobat Reader, Flickr, MySpace, Skype, etc… . Web 2.0 should always be a booming success if the application has zero marketing cost. Value added services should help the same to maintain a precalculated / speculated amount of money to flow in. Every web 2.0 company can make revenue in the following ways.
I call these the Navarathnas of Web 2.0

1. Allow users to store data/activity for free up to a certain limit.
2. Make the tool (web 2.0) to be interactive , fast , optimal which will attract the users to do it again.
3. For users who cross over certain limit, provide information of how to obtain more features / activity by paying for Value Added Service.
4. Allow users to share the data/activity information with their other friends , by requesting them to register for a similar service.
5. Don’t provide free credits, for users introduced by them. U cant give any more.
6. If a user joins by them self don’t provide free credits again for joining. Ur already free.
7. Allow users to directly take the data / activity out of  your system to your partners system, where you need to cash upon the transfer from your partners, make sure your partner does not tie up the system which is an exact replica of yours.
8. Index and optimize search across the data of all users who are willing to share it, and bring in revenue by bringing in ad for targeting such customers.
9. Allow users to add meta data, make some of the users feel the taste of being a developer… which will make computer novice very happy, expert and developers to learn / make use..

All these Navarathnas should stay on top of one gold ring model which is called the value of your company. When you have such a web 2.0 business built, no doubt that your company will become a multi million dollar business. Make sure that you a solid infrastructure to support the growth of your user base. Having 100 users at a time should not bring down your server.

Cost of Growth
Business heads might have heard about ‘J’ Curve for cash flow. But when u start a web 2.0 based business i am sure you will have a very short time to reach the date of cash breakeven, with minimal financing needs and slower burn rate. Your Date of first positive cash flow can be expected no later than few weeks , if you did every thing correctly. You will not see mostly a J curve but an ‘S’ Curve.
Never in the course till u see the exponential growth, reach a VC for fund. Reasons ull know when u try.
Web Enabled network effect is what important for web 2.0. For example one phone user who cannot call any one in/out of his/her network is not going to work. More the number of friends and connections to whom the person might connect to becomes a major resource of connectivity and the network becomes more of value. That is one of the reason of why you can see VoIP having an edge over the other service providers who charge on a minute based. Its not that the companies which are not able to provide such service are cruel to its customers but the infrastructure on which they built the service is obsolete. Those companies are in the death rope unless they switch their infrastructure.
Network Effects
Primary purpose of bringing up network effect is to reduce customer acquisition cost.
Direct network effect and Indirect network effects can be a key criteria. Cross network effects and Social network effects seem to be a virtual growth environment but they really are not because producing those network effects are easy, but cost will increase based on viral feature of them which they have within them.