Monetizing Web 2.0

MA-Thesis / Master von Dirk Schubert

Abstract:

Marc Hessen, president of the National Venture Capital Association, stated: „The issue of venture capital hits close to home in the technology field, where investors got so badly burned with the dot-com bubble… Investors learned their lessons from the poor business models of Internet companies of the late 1990s and early 2000s.“ Jeffrey Sohl from the UNH verified the situation: „Many venture capitalists have placed more stringent demands on the businesses they invest in to show viable business models and the ability to generate revenue. In Web 1.0, you didn't even need to do that. Today, they have to show they have a real company and real customers. They need to show they can make money over time.' The burst of the New Economy bubble was the end of a hype – a the begin of the development of more revenue-based business models. But which business models survived the New Economy? Why are eBay an Amazon so successful today? Which success factors have the surviving companies used? Are there similar developments in the Web 2.0?

Is the Web 2.0 even a Internet bubble, a hype or the new era of business?

The history of the Internet shows the development as even the surviving and fall of new business models during the New Economy.

In the first two chapters I analyse the technology and the development of the Internet and the New Economy. Which business models have been developed, which models survived the fall? The result of mistakes made till 2001 could be the experience for a new Internet era: the Web 2.0.

What does the term „Web 2.0“ mean? In the third chapter I examine the technology basics, and in the fourth chapter the different business models. The development of this Internet era is ongoing.

To identify successful business models I compare companies with different business models. The comparison is based on the review business model, the financials and the performance of the websites. With the help of software applications it is possible to identify trends.

My hypothesis is: Web 2.0 companies have to concentrate more to the market places than to Advertising business models like on Web 2.0 communities; or to include this market places if possible.

Table of Contents:

Textsample:

Chapter 3.5.2, Online games – Secondlife vs. Hattrick vs. Die-Staemme:

To show the strengths of the performance analysis tools I give an example on the Internet game market with Secondlife.com, Hattrick.org and Die-Staemme.de.

Revenue business model: Secondlife.com is a Web 2.0 virtual game, where people are able to define a visualized second character on the Web. To reach a higher virtual status user can offer products and services or to change real currency in Linden dollars, the virtual currency. Beyond the game mechanics users are forced to make online money with commerce in the virtual world; it is possible to exchange it in real money. This will be used by Old Economy companies like BMW which shows a new car model first on Secondlife. With the experience of the mass BMW can change the interior. One year ago, the company got a global media hype driven by mostly positive news, but negatives too like f.e. illegal online gambling. Hattrick.org is also a tactical online game. Users can manage a virtual soccer team and train them. In different leagues, national and international cups they can show theirs tactical and financial abilities. The third site is Die-Staemme.de, even an tactical online game. Users are populating a virtual world and fighting against other populations. The game mechanics of this three websites are different. Secondlife based on the commission-based and advertising business model; Hattrick und Die-Staemme are freemium-business-models; the registration is for free, users have to pay for premium services.

Beginning with the media hype to the number of content, the backlinks it should be clear, that Secondlife.com is the best business model of these three online games. Isn't it?

Financials: It is complicated to compare the financial numbers. The payments of these three companies are different and a secret of them. Secondlife makes revenue with direct advertising and the exchange of Linden dollars for more then 200.000 daily users. Owner Rosedale spoke about million revenue and a small profit every day, the real revenue is still open. At this time 140 employees are working in the Linden Lab, the owner of Secondlife.

From my own experience 10% till 20% out of 930.000 Hattrick users are paying annually 25 Euro and a few companies are paying for advertising. That makes 2.5 to 7.5 million Euro of membership revenues; advertising added. 14 employees are working for Hattrick owner Extralives. In 2003 Die-Staemme.de has been started by InnoGames GmbH. The platform has 1.3 million users in 12 countries. Like Hattrick.org InnoGames developed Premium-memberships with an analysis comfort, but no gaming advantage. Numbers of revenue are unknown, could be the same like Hattrick.org.

Performance: I use Alexa to compare the page views and the unique users. Unique users counts every user with a different IP, under page views every provided site will be counted. The comparison gives a first link to the intensity of website usage per user (Figure 34 – Comparison of Page Views of Secondlife, Hattrick and Die-Staemme.de, Figure 35 – Comparison of Unique Users of Secondlife, Hattrick and Die-Staemme.de).

The media hype of Secondlife in end of 2006 is good visible on the second figure. The number of members increased, but the number of page views not significantly. Since 2007 both numbers are decreasing. A reason could be the high number of not used accounts. In contrast to Secondlife Hattrick's strategy is to delete death accounts after six weeks. Hattrick is in both categories much more interesting for users then Secondlife or Die-Staemme.de. The page views of Die-Staemme.de are a lot higher then the page views of Secondlife, but they have less unique users. Less users of Die-Staemme.de are viewing more websites then Secondlife users. In a second step I take a view on the velocity and the average stay of users to identify growth and user behaviour of users (Figure 36 – Comparison of Velocity of Secondlife, Hattrick and Die-Staemme.de).

The results show the big growth of Die-Staemme.de; Secondlife and Hattrick are stagnating. The users of Secondlife are only 9 minutes per day on the website, Hattrick users 2.5 times longer. This numbers are important for potential advertising companies to use these sites.

Results: All together hattrick.org has the most unique users with the longest average time on the platform. But this website is stagnating. In the last year the number of members was fluctuating between 930.000 and 970.000 users. It is difficult for Hattrick to find new markets, the target group of user who are interested in online soccer is limited. The company opened this game for 120 countries, right now they have to use the potential of this markets. The situation of Secondlife is more difficult. The trend is degreasing; the company tries to get more users with a higher number of employees and much more money. The media hype is over, the numbers didn't change significantly. The model is interesting for big advertising partners, but the common user with more then USD 30.000 annually income isn't really interested in this game. Therefore – Secondlife has to change the game mechanics. The smallest company – InnoGames with Die-Staemme.de – has the biggest potential: in only 12 countries they have more then 1.2 million members, this number is increasing. The game mechanics for users to stay on the platform is better then Secondlife.

The financials are even interesting for investors, but the trend doesn't speak for Secondlife, more for the Die-Staemme.de and Hattrick.