Back in the late 20th century the business model for dot-com businesses was “Attract the eyeballs (website visitors), and the business will follow.”

Many businesses executed that model, such as AOL, FlyFishing and an embarrassing host of others, almost all gone by now.

Over time the model of attracting eyeballs simplified to Google—just Google.

Since then Google has created an effective advertising model for websites that attract eyeballs. It’s called AdSense, and the model is very simple.

Attract a large number of visitors (eyeballs) and Google will monetize those visitors through its AdSense advertising program. Google selects ads that match the profile of visitors to your website, posts the ads on your site and shares a portion of the ad revenue with you.

Google keeps all the control and can limit your revenue.

Social networks and blogs are perhaps the poster children for this Adsense business. Social networks such as LinkedIn, Facebook, and MySpace generate revenue primarily from advertising.

The community creates the content that attracts the eyeballs, and the eyeballs attract the advertisers.

Blogs are only a little different. For a blog the author creates the content, rather than the community. But after this, the model is the same. The content attracts the eyeballs, and the eyeballs attract the advertisers.

Write a compelling blog and the eyeballs/advertisers will come.

Unfortunately this is a model for a lifestyle business, not a long-term business. Over time the competition increases and Google lowers the payout, so the revenue decreases.

Is there an alternative to the model of ever-declining revenue from Google Adsense?

Yes, create some old-fashioned value from the data itself.

The Data is the Business

Last week I discussed the concept of creating business value by collecting and selling data. That is a good alternative to the Adsense advertising model:

Create value in the data.

The benefits of a data sales business model are compelling:

• Low start-up costs. Use the cloud for your computing and storage. Google and others offer free access for applications with small bandwidth demand.
• Easily scalable. Add storage as the database grows. Add bandwidth as customer demand grows.
• No delivery cost – the user shops and selects and takes delivery online.
• Minimal cost of goods sold (COGS). This really depends upon your data collection model.
• Immediate global access and delivery.
• Captures the value of the “long tail.”
• Relatively easy to protect. Compared with code, a database is easy to protect.
• Even the meta-data (data about the data in the database, e.g. statistics) has value. Think of the top 10 lists, such as the “most popular search phrases” that Google publishes.

But if this business model is so good, why isn’t everyone starting a data sales business? Maybe they are…

Join me next week when we discuss what type of data sells.

See you all then.

Your comments-priceless

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Whether I’m socially disabled or just plain antisocial I’m the last person you want to ask about social media tools and whether/how to use them—but I keep getting asked. So when I accidentally fell into a dialog with Stephen Collins, Founder and Chief Troublemaker at acidlabs, during a thread on LinkedInBloggers (a yahoo e group) I asked him if he’d be willing to share some of his knowledge and he said yes.

According to Stephen, ‘he’s a frequently self-appointed tricky problem solver driven by a need to help people and organisations effect change in their capacity to retain, distribute and share knowledge.’

Without more ado, here’s Stephen.

Why you should be using social tools in your organisation

Just the other day, I read this comment from an accountant on a newspaper article about social networking in business:

‘Interesting info about Twitter – yes I was in that group that thought it would never catch on! Maybe I could send riveting reminders about when [sales tax] is due :)’

The writer’s offhand comment is actually not too far off the mark. This type of use is actually appropriate for a tool like Twitter and matches fairly closely with other emerging business use of Twitter where smart, social network aware organisations are using it as a channel to keep their community abreast of current happenings.

With a growing number of major businesses such as IBM, SAP, Janssen- Cilag and Morgan Stanley using social tools inside and across the wall to manage collaboration efforts, networking and communications, any organisation that simply discounts social tools as an effective medium is doing themselves a disservice. The cries of ‘time wasting’ and ‘not for business’ are ever more clearly wrong and often made by those who are dismissing social tools without looking to understand.

Now, let it be very clearly said that open slather is not the way to go for most businesses. Letting people muck about all day, grooming their Facebook profile is, frankly, less an issue of time wasting and more a matter of good people management.

Appropriate use policies that are very clear on what is and isn’t allowed and careful steps towards use and understanding are the way to go. As an independent consultant this is advice I give to my clients as I speak to them about the opportunity social tools offer them in terms of staff attraction, engagement and retention, for knowledge and information management and for collaboration. A little research is all that’s needed to find a wealth of information to support this position.

My business uses social tools as a core part of the way I deal with clients and peers around the world. Using these tools has afforded me opportunities to become engaged in communities and work that might otherwise never have crossed my radar. In the last year, I’ve presented at a conference in the USA (I live in Australia) and met in real life in excess of 100 new and interesting people I might otherwise never have crossed paths with. Every one of those opportunities was as a direct result of the networking and information and knowledge sharing opportunities opened to me by using social networking tools.

I am a regular user of Twitter (probably one of the most prolific Aussies, actually), I use Facebook to track what my professional communities (and friends) are up to and are talking about, I use LinkedIn for strictly business networking and to ask and answer relevant questions, I use Upcoming to track and note my attendance at various events and I use several other social networks for their specific purposes – Flickr for photos, delicious and Magnolia for bookmarking, TripIt and Dopplr for travel and meeting coordination and BrightKite (a new network) for tracking location and arranging serendipitous connections with colleagues, peers and friends. I also blog and use tools like Google Calendar, BaseCamp and Google Docs to keep track and store information that is important to me and my clients.

There’s no reason your organization couldn’t be doing the same. If it’s good enough for Downing Street, who are officially blogging, using Twitter, YouTube and Flickr and significantly opening up the British government to constituent participation, it’s probably good enough for your organisation. As an Australian, I only hope that our Prime Minister sees what’s happening in Britain and does something similar.

I would be more than happy to have a conversation with you or anyone else reading this post about how social tools can help you build brand and community for you and your organisation. My contact details are very public – you can find them at http://www.acidlabs.org/

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