Social Enablement – the Web’s Real Business

Being inside the industry allows me to observe certain corporate trends and I have come to my own conclusions regarding what it means to be a real online business.    Services such as Friendfeed and Twitter receive a tremendous amount of public recognition and many blogs are written about them.  However in this article I want to discuss a separate segment of the market, I want to give an overview of the social media B2B marketplace.  Social enablement, whether it is in regard to communication or media is the backbone of the online industry, and it is the main object that is staving off another “dot com” bubble burst.  Companies like Brightcove, Vidshadow, Ning and Jive Software (just to name a few) are true enablers in the Web 3.0 era.  And one thing that separates them from the typical Internet companies is that they are businesses that have one sole purpose: generating revenue.  Online companies have a propensity to forget that businesses are supposed to make money, and it was that thought which caused the online bubble to burst at the beggining of this decade.  And with a cursory inspection, it would appear that online companies today have the same mindset.  See below for some examples:

1. Youtube doesn’t generate anywhere close the advertising revenue to even pay for the bandwidth costs to stream their videos, much less the ability to payout their licensed content providers on a per stream basis.  And since user generated videos are by nature inconsistent, Google has a daunting task ahead of them to take Youtube to profitability.

2. Twitter is the microblogging service that allows users to share quick snippets of information either about themselves or something they wish to discuss.  As of now there is no revenue at all for the company and I doubt there will be for the near future.  Last week they finalized a $15 million dollar round from Spark Capital, however in order to generate revenue, Twitter will either have to add a monthly subscription charge for certain services or start placing SMS ads in the text messages they send out.  Either of these actions would hurt their market share since users have become spoiled by using 100% of Twitter for free and also with any advertisements.

3. The final example of a popular consumer focused web company we will look at is FriendFeed.  Even though their burn rate is much smaller than Youtube or Twitter, it still has no revenue model built into the service and now any attempt to inject either ads or charging for services would dramatically decrease the traffic to the site.

Now let’s talk about some companies that are actually the backbone of the online world, social enablers.

1. Brightcove is the leader in online video enablement.  With sites such as Wall Street Journal and the Weather Channel using their service it is no surprise that they have easily raised $115 million in the past few years.  But Brightcove is not a charity, they generate sizable revenues either by charging websites bandwidth fees or streaming ads inside each video played.  This allows them to responsibly expand their business without having to rely solely on VC funding.

2. Vidshadow is an online distribution company that allows third party websites to host its media player, and stream licensed content to their respective online viewers.  Vidshadow is a publicly traded company (VSHD) and therefore is a revenue focused company.  Each video that is played on the Vidshadow Network is paired with an in-stream advertising unit.  This enables third party sites to augment their online revenues while adding a social feature on their site in order to both retain and increase traffic.

3. Ning was founded with the mindset of enabling third party individuals or companies to create their own social networks.  Instead of attempting to create another Myspace or Facebook, Ning wanted to allow ANYONE to form their own social portals.  This can be a very effective tool for corporations to connect their customers in a fully controllable enviroment.  In other words comapnies that create a social network on Ning do not have the same contstraints that they would face on Myspace or Facebook.  And Ning has two revenue models.  They either place ads on these social networks with no revenue share and thus earn 100% of the revenue the ads generate, or the social network can choose to control the ad invntory and pay Ning premium fees.  Either way, Ning is a very intelligent business model.

4. The last company I will discuss is Jive Software.  You most likely have never heard of them, however they are the social network enablers behind sites such as Bank of America’s Small Business Social Network along with CNN’s iReport portal.  But don’t try to ask them to do anything for free, Jive is very good at what they do and they know it.  You can be assured companies like Bank of America and CNN paid handsomely for the services rendered.

In summary, we have come a long way since the bubble burst.  And the potential that is currently available online for marketers, product manufacturers and communication companies has never been stronger.  From powering online entertainment and media to enabling communication, the non-techie should feel secure knowing that the backbone of the Internet is in the hands of companies that know the #1 rule of business: generate revenue.