Stop asking âBut how will they make money?â | Andrew Chen (@andrewchen)
Kyle Harden stashed this in Monetization
Here is a very interesting perspective from Andrew Chen on monitization. It's a great conversation when people are discussing the value of Facebook, Twitter, and how they make money and how much money they can make per user.
It's a matter of how you tap into the traffic and drive engagement on your site. If you have engaged users, your site is scalable, you can find the money.
The central point -- no products with lots of users failed to make money -- is true for the producs that are sustainable. But it's so hard to know if an app will be sustainable: look at MySpace, Bebo, and Friendster as three services (that had network effects but) that couldn't maintain.
Around Silicon Valley's circles these days, the question isn't whether Facebook or Twitter can make money, but whether they can make enough money to justify their valuations.
Absolutely. You also need to evaluate if the company can build a moat, so they are not easily disrupted, which is what happened with Myspace. As we talked about in the Dropbox thread, despite having a great product, they are now in a very crowded market and there are bound to be some losers.
Unlike MySpace, Dropbox does seem to have a moat: its users are very loyal to it, and they're incentivized to recruit more users.