When Google started raising money in 1998, Sergey Brin and Larry Page didn’t have a revenue model — or at least that’s how the story goes. The company’s highly successful text ad program didn’t start until 2000, but Brin and Page may have had at least some idea of how to monetize the service by the time Sun co-founder Andy Bechtolsheim gave them their check. They did, after all, sign their partnership with Yahoo before AdWords launched.
I don’t remember how common it was for startups to launch without at least an unrealistic revenue model back in the dot.com boom — I mean, most of these companies were at least trying to sell banner ads. Anyway, Google has become the poster child for developing a user base first and worrying about monetization later. Twitter’s probably the visible example of a company following this example.
If investors want to back a company with no revenue model that’s their prerogative. But is it fair to customers? I’ve cited before frequent TechCrunch commenter Edward Borasky‘s assertion that users ought to know what a company’s business model is before they sign-up.
I agree. As I’ve said that doesn’t protect a customer against pivots and acquisitions. Still, it’s a good start.
The cliche goes, if you’re not being sold a product, you are the product. I think that’s a little harsh. You can also think of a transaction with a free site as paying with your attention, or paying by allowing your behavior to be tracked and data mined. Maybe it’s worth it to receive a particular service, but you should at least have the right to know what you’re paying.
So I was excited to stumble across the site How Do They Make Money, even though it’s deeply flawed. The interface is annoying, it’s limited to well known services and the information is shallow and in some cases may be out dated. There’s also the inherent limitation that the only things we can only know about a company’s revenue model is what they choose to release (unless it’s a public company), and we only know so much about what third party ad networks and other partners are doing with our data.
But it has potential. For example, the site actually breaks down different Google sites, which is a great reminder that although Google makes gobs of money off its search ads, not all of its services necessarily make money. You can filter by business model — so far only LinkedIn is listed as “selling data” (note: you don’t necessarily need to “sell data” when you own your own ad network, like Google, Facebook and TechCruch owner AOL).
It reminds me of TOS-DR, the terms of service demystification and watchdog site I wrote about a couple months ago. It would be great to see TOS-DR start adding some revenue model information into the mix, though they’ve already got a lot on their plates (oh, they’re raising money right now if you’d care to donate).
I saw a suggestion somewhere that these sites should be turned into browser extensions. A TOS-DR one would be really useful. But unfortunately not that many people use extensions. However, Firefox has been tying to stay relevant and has also been pushing the privacy angle. Perhaps Mozilla should consider shipping something like a TOS-DR/How Do They Make Money mashup plugin with Firefox, along with other privacy tools.