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We’re all aware of how important cash flow is to any business, especially start-up tech businesses where cash flow equals food on the table…  So how do the new raft of user generated content offerings plan to make their cash flow sustainable?

Something that as interested me since I was first introduced to the internet is the idea that the internet enables people to communicate effortlessly. We take this for granted now, but it never used to be like this for humans. For the first time in human history, I’m literally able to communicate with someone on the other end of the planet at the speed of thought (or at least the speed that I can type).

The spin off of this is the natural aggregation of people inclined towards similar interests – we’re all happiest when we’re living and interacting with people like ourselves – enter online communities.

The idea of an online community is an easy to understand one, and the benefits thereof quite obvious, but it’s still not clear to me how one could monetise a community that is essentially made up of people giving away their thoughts, time and energy freely. All you can do is grow as much traffic as possible and hope that your advertising will pay the bills, because you can’t force them to create more content for you... you have to provide value to them to interact in this way.

No amount of Ajax, slick user interfaces, gradients or comments will take away the fact that 95% of the worlds population simply don’t live in the online world as much as we do – they prefer to live in the real world where they interact with people in real time, doing real things, and only dipping into the online world when they need to (email, search, shopping, services).

The web builders that supply the above email, search, shopping and other services, do live in an online world – we have to, just the same as the architect lives in the architects world and the painter lives in the art world – but it’s ludicrous to assume that because we do, and we can see the benefits of better UI and vertical content (gigaom), that we can build a business around traffic that may or may never come, at least not enough to create the necessary cash flow that a business needs to survive.

Venture funded start ups can because they’ve got other people’s money sitting in the bank, waiting to be spent, and in some cultures (hello USA, goodbye UK) it’s OK to fail, as long as you admit your mistakes, learn from them, and promise not to do them again (hang on, wasn’t that web 1.0?). But that doesn’t mean everyone else can and should.

Don’t get me wrong – I love the idea of vertical niched portals of user generated content enriching the web and providing better information easier, but I’m not sure that I’d want to risk my hard earned cash on something that is quite possibly riskier then opening a kebab shop outside a nightclub.

Which brings me to my next point: what’s your take on creating niched user generated content portals and monetising them? Should they be monetised?

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Published 8 August, 2006 by Gareth Knight

27 more posts from this author

Comments (2)

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Nic Brisbourne, Partner at Esprit Capital Partners

almost 10 years ago

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Kiran Murthi, Consultant at Infosys Technologies

Well, haven't we faced the same question again & again. We have seen this happen to email, to search & even to the internet itself. Maybe this phase is typical of any technology adoption cycle. Cash flows are not something that are planned for along with technology innovation. They are created by entrepreuners who see application, leverage & value in technology. Strangely, making money or building cash flows is seen as 'bad' or 'evil' within certain sections of the 'community' you speak off & the same community turns around and laments the lack of cash flow 'visibility' for newer technology. IBM, Microsoft, Google have all been created out of a vision which helped build cash flows from new technology, any new technology will have to sit and wait for the next entrepreneurial vision to be able to realise cash flows from it. Look at these examples it is clear that no two of them had the same cash flow model & none of them could see the next wave coming or could leverage the next technology that came by.....

If we knew how cash flows could be created, we would'nt be talking, we'd just go ahead and realise it......

almost 10 years ago

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