Do Web 2.0 start-ups need profits?

Has Michael Arrington gotten public Web 2.0 business model religion for the Web 2.0 start-ups he obsesses about? Not really.
Written by Donna Bogatin, Contributor

Michael Arrington today cites “a failure by companies to drive earnings enough to keep up with stock prices” as a principal reason for the “Web 1.0 implosion.”

It is a surprising public perspective from Arrington, given that his Web 2.0 TechCrunch phenomenon, “founded on June 11, 2005,” rarely discusses the need for earnings, revenues or even business models, when “obsessively profiling and reviewing new Internet products and companies.”

In “Web 2.0 champions don’t champion business plans” and “Web 2.0 start-up strategy: sell-out big” last year I noted how Arrington publicly disavows Web 2.0 business plans, even though his thriving TechCrunch Web 2.0 business is based on a solid, money-making business plan:

TechCrunch cheerleads daily on behalf of twenty something software developers rapidly prototyping cool Web 2.0 apps. TechCrunch is not obsessed with the commercial viability or long-term sustainability of new Internet products and companies, however.

Arrington reaffirmed his disdain for Web 2.0 business plans today at “The Future of Web Apps Summit. No need for a “perfect revenue model” in Arrington’s Web 2.0 book. Moreover, Arrington warns that Web 2.0 “losers” all “over business-planned.

Has Arrington gotten public Web 2.0 business plan religion for the Web 2.0 start-ups he obsesses about? Not really.

While his “Bubble, bubble, bubble” commentary today acknowledges “the public markets…won’t let companies go public on the vague promise of future revenues and profitability,” he hails “Network Effect is still the most powerful force driving Internet success today.”

Arrington asserts: “I disagree that Web 2.0 companies cannot become sustainable businesses,” but he only offers “network” traction, or popularity with non-paying users, as a mark of sustainable businesses, with unprofitable Digg, Facebook, YouTube, put forth as examples for emulation.

In “Web 2.0 success metrics: Revenues, profits in 2007?” and “Web 2.0 hype: Popularity without profits” I reiterate the need for start-ups to embrace solid, revenue generating Web 2.0 business models, rather than simply relying on gaining traction with non-paying users via “cool” apps.

I have underscored before, TechCrunch would undoubtedly be a greater champion of Web 2.0 start-ups if it started championing realistic, attainable financial goals for Web 2.0 start-ups.


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