A couple days ago, I read a fascinating article in Wired Magazine on Craig Newmark and why his Web site has turned into such a train wreck. Today I found a blog posting from a VC in New York analyzing the article. His insights are highly thought-provoking as well.
I found this fascinating quote today:
The much more interesting conversation is about the appropriate economic model for a social network that depends on the contributions of its participants and increases in value as more people use it. One possibility is that the economic models of these networks will look more like Craigslist than Yahoo. Recent estimates peg Craigslist's revenue at more than $100,000,000. Not much compared to Yahoo's billions, but Craigslist still employs only 28 people. Even allowing for substantial bandwidth, and server costs, it is still hard to imagine how their costs are more than $5,000,000. Since Craigslist collapsed a multibillion dollar classified advertising business into a fabulously profitable $100,000,000 business, perhaps we should be talking about the potential deflationary impact of more "zero billion dollar" businesses. As the radical efficiencies of the web seep into more sectors of the economy, and participants in social networks exchange attention instead of dollars, will governments at all levels need to make do with less tax revenue? That's a scary thought in an era of high deficits unless traditional governments can learn from the efficent governance systems of social networks and provide more for less.avc.com, A VC, Aug 2009
You should read the whole article.
The title of this post refers to a function attached to his blog called reBlog, which is essentially the bloggers' equivalent of retweeting on Twitter. I'll play around with it when I have more time, but it looks fascinating. So, then, Fred Wilson, if you should happen to backtrack to this post, thanks for your insights. I'm definitely adding your blog to my blogroll and RSS readers.