A Mogul To Be

3 steps to web based business success

March 24th, 2007 by Robert

Ryan Carson of DropSend.com has an article on TechCrunch covering the 3 points to building a successful web application that will be profitable.

The three points really apply to just about any business, but he covers the particulars concerning web applications today such as a free plans that show the value of your product and encourage upgrades to a paid version of your product.

Building a content site

Web businesses that are predominately content based have the tough decision of going completely free or offering a subscription. These businesses are largely content based such as Digg, Netvibes, Flickr, etc. As Ryan points out, to have a service like these become profitable you really need a large amount of traffic in order to sell advertising. Even with advertising it can be pretty difficult to truly become profitable.

Sites like YouTube and Digg for example have a high cost of operation. Bandwidth, server hosting, maintenance and upgrades can get very costly quickly. On the flip side, most of these companies can be started with relatively little capital. The beauty of a web application is that as a general rule they can be scaled up. You can start with a small leased server and as traffic (and hopefully revenue) build up you can grow.

Building a product

The alternate route to take is that of a hosted product. SmugMug, DropSend, 37Signals are all companies that fit into this model. Most of these companies have a free version that they use to allow a user to try out the service and then have 3 or 4 upgraded versions from there. Having a free version can also help to generate awareness of your product. After all, word of mouth is always the best selling mechanism. In today’s blogging world, word can spread quickly as well further driving potential customers to try out your product.

Whichever route you are thinking about taking, read Ryan’s article as he has some other good information like pricing models.

Note: For the software developers out there reading this I know that scalability of an application isn’t always as simple as just plugging in more hardware. There are many other factors to consider however it is easier to scale up software than other types of products.

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