Some internet companies laid their cards right out there. For example, eBay started out as a marketplace. You sell your stuff on Ebay, you pay them a commission, they render a service, they get paid. Other companies, however, operated under what for years looked as an NGO model, and only when they were immensely popular did they come after your money, and they got amazing valuations for doing so.
Of this kind two former Internet NGO´s come to mind. One is Google and the other one is Skype. How it is that Stamford University does not own at least half of Google´s $80bn in stock escapes me. How it is that Larry and Sergey were able to use the immense Stamford University infrastructure for free for so long while building what is now an empire for themselves, is a mystery as well. If you Google the history of Google on Google you will see that during the first years of its existence, until VC money was raised and ads appeared, Google was mostly seen as a gift to humanity. What was great about the early Google is that it gave you useful results on your searches and it seemed to want none of your purchasing power. But when searches reached the billions, the famous internet bubble idea of monetizing eye balls held more truth than ever. And now at $288 per share, Google is worth $80bn. However, Stamford is not a major shareholder and Google is far from being and NGO.
The other company that emerged as an NGO and only recently has shown it´s money model, is Skype. I remember downloading Skype for the first time and wondering about the profit motive. It too looked like an NGO allowing us to talk to each other for free. It appeared that somewhere in Northern Europe there was somebody with a lot of money to lose. But again that was not the case. As Skype grew (now up to 165 million dowloads according to their site), VCs entered the game and Skype started Skype In and Skype Out. Skype is nowhere near as valuable as Google but still a remarkable business.
After the bubble ended many people argued that internet companies had to have a profit motive from the very beginning, that companies had failed cause they had no clear business plan. Well, I think that was true in some cases but certainly not true with Google and Skype. They pursued the NGO model, then the sustainable NGO model and lastly the high margin corporate approach of Microsoft.
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Antoin O Lachtnain on September 9, 2005 ·
I agree with you.
One big issue I have with this is that it looks like you basically have to be a bit reckless with your money to get into the ‘big-league’ Internet game.
You have to bet big money with little prospect of return in order to have a chance. Most of these fail – look at Friendster or some of the other social networking sites, which although popular, haven’t really discovered a revenue model. This is ultimately turning the Internet into a ‘big boy’s game’, where cashflow-led startups have little chance of building up into bigger businesses. That’s life, I guess.