I suggested the other day that perhaps we've been looking for money in the wrong places on the Web, and particularly Web 2.0. I still believe that's the case, but Thomas Edison, inventor of the light bulb and the phonograph, may offer an alternative argument:
Perhaps there really is no money in Web 2.0, at least, for the inventors of all the gee whiz services like Digg that give it life.
I say this because I was reminded by a recent program on National Public Radio that Thomas Edison saw roughly $0.00 from his invention of the phonograph, despite it being a roaring social success. Even as his invention lit up parties everywhere, Edison got nothing.
In fact, he got worse than nothing. Because of his failure to capitalize on the phonograph, investors went frigid on investing in his next innovation, the light bulb.
Society turned out fine and the world has since made lots of money around Edison's inventions. But it's telling that Edison, himself, saw little from his work. This may be an unfortunate lesson for those building out the future of the Web: instead of the untold riches you and your VCs expect to make, you could very well be taking a vow of poverty, the more innovative and game-changing your technology may be.
The focus, then, must be on innovating both technology and business models for monetizing it.
In a recent Businessweek the CMO for Travelocity says of advertising on MySpace, "We love our MySpace page, but we're not going to spend money just to acquire more friends for the gnome," referring to Travelocity's "Roaming Gnome" mascot. Ultimately, businesses care about what drives revenue, not what drives downloads (open source) or eyeballs (Web 2.0). There must be money flowing or your cool new invention will fund someone else's retirement, not yours.
The open-source world has recognized this and has largely moved on from obsessing over the technology, and instead splits its time between technology and business. The Web 2.0 crowd needs to do the same, moving on from shiny baubles to give equal or greater time to shiny bank accounts.
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