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In the beginning, making money on the Net was all about selling stuff to a mass audience. While eBay and Amazon figured it out, most (think of etoys and Pets.com) never made it. But now the Web has a new business model: some of today’s hottest startups build loyal audiences by offering specialized content that customers themselves help create and distribute.
Think of Flickr, the Canadian photo-sharing site bought by Yahoo! for a reported US$30 million; MySpace, the networking site your kids are on right now, bought by Rupert Murdoch for US$580 million; or YouTube, the video site bought in October by Google for US$1.6 billion. “Web 2.0” properties eschew bargain-hunting consumers in favour of “members” who grow sites by evangelizing them to friends, family, colleagues and classmates.
“There are tons of opportunities centred on this concept of connecting and sharing, and lots of smart people taking advantage of them,” says Stuart MacDonald, the founder of Expedia.ca and now a tech investor. He sees particular opportunities in vertical niches, such as the forum that HomeStars.ca provides for consumers to share their critiques of residential renovators and home-improvement suppliers.
The Net’s ubiquity makes it difficult to suggest specific opportunities because rivals are so quick to enter a niche once it has been identified. But the key to creating a viable business is to use today’s user-friendly Web software tools and your ingenuity to solve real problems. Albert Lai, founder of Bubbleshare, a Toronto-based photo site, suggests modifying a desktop-based application such as a word processor or a graphic-design program in order to make it more user-friendly and accessible from anywhere through the Net.
Consider Toronto-based FreshBooks.com, an online invoicing and time-tracking service that helps small businesses submit more timely, professional-looking bills. With a free version as well as paid services costing up to $39 a month, FreshBooks has more than 50,000 users in 120 countries. Another business model is the “mash-up”: combining niche databases with common applications such as Google Maps to create new tools — for example, local maps of homes for sale for less than $300,000.
“The cool thing about this wave is that these are all technologies that don’t require an enormous amount of capital,” notes Lai. With Microsoft’s new Vista operating system promising to make “rich Internet applications” more common than ever, he believes the Web 2.0 game “is still just in the second inning.”