MappingTheWeb //

After reading and commenting on an interesting article over at Wisdump, I think the topic merits a post of its own. 

The article dealt with the notion of charging for a service, rather than monetizing with Google AdSense (or advertising), the standard web 2.0 tactic.

But users don’t want to pay and companies don’t want users to pay. Now, the former makes sense, but the latter needs some explaining…

What we are overlooking is the whole corporate ‘web 2.0 mentality’ here.

Companies that don’t charge users aren’t actually marketing their services to users. They’re looking for quick sign-ups and account creation. This leads to buzz and corporate gossip. In other words, the company is marketing to potential buy-out candidates.

By driving user adoption and launching with a promotional blitz, many start-ups can manifest a popular image and create the illusion of a much larger user base than reality. This is all due to the marketability of a ‘free’ service, as opposed to a subscription model.

Next, the start-up attempts to sell to a larger player. Popular examples include Google, Yahoo, or Microsoft. These ventures never really had plans for a revenue model all along. The hope is that monetary compensation will come in the form of an acquisition rather than a revenue model. In doing so, the company passes the burden of monetization on to the acquisitor. Slapping on a subsciption fee was never an option. It would hamper user base growth and provide a barrier to entry for many.

This is the so-called the “keep-your-fingers-crossed” strategy. It is also commonly referred to as the “let’s-hope-we-get-bought-over-before-we-run-out-of-cash” strategy. Either way, they’re both making reference to the same clever tactic.

This corporate strategy is very shallow and risky, but with such little capital put forth on most web 2.0 ventures, it’s worth risking say $50,000 when the potential pay-out may be several million dollars.

NOTE: This is not the case for all start-ups. But don’t kid yourself by denying the fact that this is a commonly used strategy in the web 2.0 world. Also note that I am not a capitalist pig with no heart. I do believe in the hard-working entrepreneur with good intentions. But this is the business world and I am simply pointing out the facts.

Will they? Won’t they?

Listening to news about a potential Yahoo-Facebook deal is like watching a ping pong game. A long game at that. Since acquisition rumours started swirling over two months ago, uncertainty still looms. Just when I think the deal is done, new reports surface that tell me otherwise. My neck is starting to get sore.

TechCrunch continues to report on the status of the deal, but progress is slow, if not stagnant. Why is this deal taking so long? My guess is that Yahoo doesn’t want to pay an inflated price for the social network, while Mark Zuckerberg doesn’t want to go out without a bang. He’s the man in charge and wants top dollar. Whether Yahoo is willing to offer that, or something comparable, is another story.

The hype and buzz around the story is essentially over. Now, people are just straight up annoyed and simply want to know whether it’s a done-deal or not. Add me to that list.

I think the deal would be a great accomplishment for Yahoo, if indeed it was to be completed at a reasonable price point. My biggest fear, however, is that Yahoo integrates the network into its current offering. This would severely affect the credibility and loyalty of the SN and hamper future growth. A Flickr-ish strategy may be a good path to follow. Stick with the old website and merely insert a small Yahoo logo strategically throughout, thus not taking away from the previous user experience. Piss people off with a new design and obligatory Yahoo log-in credentials, and don’t expect them to return.

As we continue to watch this ceremonial ritual play out, it will be interesting to see if Yahoo can seduce Facebook - or if the latter seems content playing ‘hard to get’ and demanding more from the relationship.

Acquisition rumours have been swirling throughout the web 2.0 world in recent days. Two start-ups, BubbleShare and StumbleUpon, have been noted as being possible take-over targets in the very near future.

First up, TechCrunch reports that BubbleShare has been in talks with News Corp., the parent company of MySpace. Details and information is still very preliminary, but the deal is rumoured to be under $5 million. The Toronto-based photo sharing start-up is only about two years old.

Check out GigaOM and Maple Leaf 2.0 for more info on the possibility of a deal.

Second up, we have StumbleUpon, an Alberta-based start-up which has relocated to the Valley. Reports indicate that the company recently approached at least one possible company to be acquired. The company is looking for $50 million.

No concrete details of any deal have been disclosed and the CEO refused to comment on the rumours. It will be interesting and exciting to watch this innovative, successful company continue to prosper.

It’s great to see all the attention focused on a few aspiring Canadian start-ups. I hope this trend continues as there are many tech gems in Canada that our neighbours down south are unaware of.

In a seemingly low-key announcement, AOL yesterday acquired news search company Relegence. The news search engine is based in New York and focuses on financial news and information.

Exact financial terms of the deals were not disclosed, although reports indicate the deal was somewhere in the range of $55-65 million.

John Battelle’s blog (link above) describes Relegence as follows:

“Relegence, a subscription-based service, aims to deliver relevant information to users’ desktops as soon as it’s published, regardless of the medium used. The notification and delivery technology draws from such sources as local and international newswires, television and cable networks, regulatory filings, Internet bulletin boards and Web sites and is designed to be integrated with internal streaming content.”

Relegence was founded in 1999 and initially funded by 1980’s junk bond king Michael Milken. Customers of the company include large financial institutions such as Merrill-Lynch, Fidelity, and Credit-Suisse, as well as large financial newspapers such as Bloomberg and Reuters.

In my opinion, AOL does not have a very robust financial offering to begin. I think the acquisition is an attempt to improve the experience and add valuable financial data and news into the mix. Yahoo! Finance has done an extremely good job at creating a useful financial portal experience. AOL would like to capture some of this market share. Even Google wanted a piece of Yahoo’s pie when it launched the much-anticipated but disappointing Google Finance.

This latest AOL acquisition doesn’t seem to work for me for one specific reason. Previously, Relegence has been mainly focused on institutional/corporate clients (B2B). AOL is largely a consumer-facing brand (B2C). There is a lack of congruency with this fit. My guess is that AOL will continue to satisfy corporate customers, but move to a more consumer-friendly offering to drive traffic and increase user base.

I have never been a fan of AOL, nor its acquisition strategy. Nearly all take-overs have flopped, gone on to do nothing, or proved to be overvalued business models. Who really uses ICQ or Netscape?

But yet, I have hope. Well, not really.

Congrats to the Relegence team.

Just a short time ago, Text Link Ads (TLA) was acquired by MediaWhiz. Financial terms of the deal were not released.

Though I’m not very familiar with MediaWhiz, I know they offer online marketing services. So it would seem like TLA is a good fit in their portfolio, assuming the price tag was reasonable. Apparently, this is only the first of a number of deals coming about at MediaWhiz.

TLA launched mid 2004 and since then has skyrocketed in popularity. Now hovering with an Alexa rank of around 1,000, the site has become very popular amongst the blogging community. TLA essentially provides a marketplace to buy and sell (yes, you guessed it) text link ads. So why the eccentric company name?

Recently, TLA launched a new service called Feedvertising, which allows publishers to place ads in their RSS feeds.

To read more about the acquisition, read this TechCrunch article or the press release.