Week 10: Inbetween placements at Kauffman Foundation

This week I have been in between placements which has given me an excellent opportunity to work on my business idea. I have teamed up with one of the other Kauffman Scholars: Luke Jefferson (see his profile here). Together we are working to start a web company which will monetize social networks.

Why? For many reasons. Here's my take on the social networking:

1. Epitomized by the dot com bubble a lot of web start ups thought that if they could get enough page views they could figure out where the money would come from later. 'Eyeballs over earnings'. *
   
2. Just look at the number of websites on the internet and compare that to website revenue. I think the internet has a long tail of very low earners and maybe 100 winners (and then the anomaly Google).
3. Now narrow the market down to just Social networks. Of the top 100 sites on Alexa only 10 are true social networks. Compare that to the 10,000's of social network startups this year which have faded into obscurity.
   
4. How much revenue do these sites make? There is very little solid evidence to confirm this as there are no published figures, the only real solid figures are the prices that the web companies were acquired for. (And theres only 1 big social network acquisition: Myspace by Newcorp for $580,000,000).

So it appears that most social networks don't wish to disclose earnings, and yet its very easy to find approximate page views (like Facebook's staggering 5.5+ BILLION page views per month and rising). It would seem like conversion of adverts into click-through/ sales is phenomenally small.

Despite this, businesses are still turning more and more to the internet to target their audiences. It would seem like internet advertising is either:

1. more successful than traditional media
2. potentially more successful than traditional media
   

Yes I agree targeting of the prospect in the right situation is much better on the internet than traditional media, but engaging the prospect to look at the advert and take it in is still very very difficult.

To combat this problem, and to exploit what Luke and I see as a huge gap in the internet advertising landscape, we aim to launch a new type of innovative advertising platform which will focus on earnings for the advertiser and ourselves from day 1. With our focus in the area of social networking.

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*In a way I also think Google has spread this false model: "if we build it they will come: if they're here then we'll figure out how to make money" but what they have that no one else has is the best advertising platform on the earth. This huge financial security allows them to try and fail at many things until they hit another great idea (like Gmail). The founding entrepreneur simply doesn't have this money cushion.