Ampers & Dot

In a surprise addition to the running series on Making Money with Web 2.0 (for previous entries, read up on Part 1: Advertising, Part 2: Freemium, and Part 3: Sell T Shirts) I thought it would be fun to add a fourth segment, to actually give hope to some of the startups out there.  See, I’ve been unnecessarily negative about the online economy, because in all actuality there are hundreds of companies out there pulling in hoards of cash because of their new innovative ideas with the interactive web.

Well today I want to talk about a monetization plan that bas been increasingly popular recently. This concept has as many holes in it as any of the other web 2.0 schemes, but interestingly, it actually works. The most plausible way for a startup to make money in the web 2.0 world is site flipping.

The idea behind site flipping is that you don’t need to worry about a monetization scheme, you just need to build something cool enough to draw in a large user-base. The more people you can convince to use your site, the more valuable it becomes because once you have a strong, dedicated, and large community, you sell them to someone bigger for a huge amount of cash. Then, making money is their problem, not yours!

In an attempt to make their money back, the big guy (likely Microsoft, Google, Yahoo, AOL, or whomever) will take your community and try to sell stuff to them (and now we’re back to the advertising model, yippee!). Hell, this even works with blogs now thanks to the likes of Conde Nast buying Ars Technica for $1.8 billion. (Note: Conde Nast- I’m for sale, too!)

The two best ways to optimize the amount you can sell your community for are A) create a specifically segmented community so that targeted advertising is incredibly easy (meaning that if you have a community that is built around music, then it’s easy to advertise music to them(assuming people still paid for music)), or B) get your user base to reveal as much personal information as possible so that they can be targeted even more directly (this is how Bebo is worth anything… I guess).

Really the only trick for site flipping is that you just have to keep enough money in your pockets long enough to get bought out. So as long as you have enough capital up front, you’ll be fine.

Ultimately this model is successful because of the growing conglomerate mega-tech companies out there are constantly battling with each other and need your community as ammo. I mean hell, Microsoft bought a small chunk of Facebook for targeted advertising purposes which valued each user at $300 ($15 billion valuation for 60 million users). AOL bought Bebo for a relative steal at only $21 per user ($850 million for 40 million users). Your users are valuable consumers to someone else. You don’t need to sell to them because they will.

The problem, obviously, is that 1) you’re going to piss off your users and you lose your company and 2) the big guys still rely on advertising to make money.

This model is incredibly similar to the house flipping concept that was so popular for a few years there. Go buy a dilapidated home, fix it up and sell it! It’s just that easy! I mean hell, the housing market did so well with this model, I can’t imagine how the same concept won’t work with the web as well.

So that’s it. That’s the end of my running series on Making Money with Web 2.0. I hope you enjoyed it and didn’t get too discouraged. Until the bubble inevitably bursts there is an incredible amount of opportunity out there to take the big guy’s money. So go get it, they’re pretty much handing it out on the street corner.