Borrowed from
marketreconblog

See also
marketrecon.net

It’s funny. Pre-bubble burst, it’s about no profit, all revenue. Post-bubble burst, it’s no profit, no revenue – but all value to the end user – something not remotely recognised by GAAP. This means financial statements are now all expenses, liabilities, and cost of goods sold (COGS).

This means the challenge of finding revenue models and monetising Web 2.0 apps will continue to haunt start-ups.

I have six [workable revenue models] in total but will focus only on the last three.

4. M&A (e.g. Thumbstacks, Zoho, Riya)
5. Savings (e.g. Skype, mySpace)
6. Credit/Token (LinkedIn, Lavalife)

Mergers and acquisitions:
This is the home run almost every Web 2.0 venture is praying for. With its media attention – bandwidth on newswires, spotlight in conferences, air time at 6 o’clock news – this is one of the main reasons why there isn’t much incentive for innovations in revenue models – even in the post-bubble era.

QDOS > MS-DOS
ForeThought > Powerpoint
Vermeer > FrontPage
SoftDesign > Microsoft Project
Vicinity > MapPoint
PlaceWare > Live Meeting
nCompass Labs > Content Management Server
Bungie Studios > Halo
HotMail
Visio
Great Plains
Groove Networks

Flickr
Del.icio.us
Musicmatch
Overture
Stata Laboratories
Oddpost
Dialpad

Keyhole > Google Earth
Pyra Labs > Blogger
Picassa
Reqwireless
Writely
@Last Software
Measure Map
dMarc Broadcasting
Dodgeball

5. Savings (e.g. Skype, mySpace)
If a product reduces cost, it’s desirable. In the Web 2.0 era, this means cost reduction attracting new users or improving customer retention.

The difference here with the M&A Model is the focus on cost – not a new feature or function.

For instance, a company may show it is cheaper for its client to add new users by “acquiring” its existing user base, than spending billions targeting the same user base with marketing activities which may be less effective and time-consuming (to reach critical mass).

In a way, this better positions a venture for an M&A exit. Many start-ups are unknowingly adopting this model – while still missing the cost saving section.

6. Credit-token (e.g. LinkedIn, Lavalife)
One model that is lesser known is the credit-token model. This is like buying tokens at Chuck E. Cheese or exchanging money for poker chips at the casino.

This one has potential – it forces businesses to think about value with an association with money. Moreover, it materializes an intangible “value” into something more tangible for the end-user.

The trick here is to find strategic places which precedes value to “convert” those credit into revenue.