While I am not a big fan of blogging about blogging, I've had this one blogging/Web2.0/business post on my mind for a few weeks now, and it looks like the time is ripe to spit it out.
There is a wave of new "web2.0 companies", we see the new investment spike, and we are clearly in the new bubble. At the same time, we see the same old difficulties: even when the business idea is sound, how do you make it profitable? The difficulty is the inevitable cost that always seems to be higher than the revenue. You need to buy servers, load balancers, and routers, you need to pay for hosting and bandwidth, you need to hire and pay your team of engineers, sales and marketing, and other employees... and every month that costs more than the revenue you seem to be able to squeeze from your business. Even while putting in looong hours and weekends.
Crazy. Whenever I enter any of the local delis or grocery stores, I think to myself: "Look, nice and straight-forward business. You buy food and sell it to folks. You know they all need to eat. You know they'll pay for it. You know who your competition is. Any new competitors are visible, so you can prepare before you see them moving in next door....". Yet, all these Web2.0 entrepreneurs are killing themselves, spending millions of dollars, and have such difficulty turning profit.
It is 2006. Over the last few years blogging has really blossomed, and
personal brands have been built. One person I have been thinking about a lot lately is
Mike Arrington of
TechCrunch. As the founder of
Edgio, he is certainly one of the Web 2.0 entrepreneurs I'm describing. However, he is also Mr. TechCrunch. He is the owner of a
super-popular blog. Super-popular means a lot of traffic. A lot of traffic attracts a lot of advertizers. Consequently, TechCrunch sports a pile of ads on its sidebars. That's revenue. Not options, not any class of shares. Cold, hard cash. But what are Mike's expenses? Servers? No, not really, his blog doesn't need a lot of server horse-power. Engineers? No, he doesn't need them, he writes most of the posts himself, and now has a few helpers. Other employees? There aren't any. So, what are his monthly expenses? Paying for hosting! That is not a lot of money!
Mike was extremely lucky (if you want to call it luck) to do the right thing, at the right time, at the right place, and do it right. Now THAT is a good business - simple operation with minimal costs, high traffic that doesn't cost much to run, and attracts advertizers.
Plus, the new Digg looks very, very nice. My prediction is that the the red line in this graph will have another little spike in a week or so.
With this expansion Simpy's service becomes even richer and more robust.
