Follow The Money Trail
On my presentations I usually ask if people remember what was the first social website ever. Some die-hard veterans on the audience will probably point to IRC, or even to the pre-Internet BBSes; but when I point out that I was talking about social websites, the usual suspects are hi5 and Friendster, both from 2003, just after the dot-com bubble burst.
As a matter of fact, ironically, the oldest social website is FriendFinder — born in 1996. At this point, usually the audience laughs. FriendFinder, a subscription-based service, is mostly known for their sister website, AdultFriendFiender, which is, well, a dating service. A hard-core dating service, to be more precise. And, like always, sex sells — and quite well. Still boasting 32 million users, the point is that a huge number of those are paying users, and this illustrates my point.
Let’s step back to 1996. The Web was not a “novelty” any more, but, well, it was still in its early stages. It was clear that a lot of things would change due to the Web. I’d say that this was the wishful thinking about e-commerce stage. Everybody wanted to prove that you could do business through the Web, but nobody had a clue of what would work. Surprisingly, FriendFinder found a rather clever way of making money — a lot of money — out of it. As a matter of fact, all vaguely-sex-related websites did make money, and the media was full of articles about how terrible the Internet was for the younger generation since it exposed them to naked human bodies. Corporations were skeptic: nobody really would be buying things from the Web, would they? Not if only the perverts were around. Unless, of course, if you were going to sell items and content for perverts. And, indeed, back in 1996, selling information (e.g. articles) was thought to be a nice business model. After all, Medline managed to get a subscription-based service running for doctors to get access to up-to-date research articles, and weren’t losing any money.
Ads were also seen to be a good investment, and tons of competing products and services were rounding up popular websites — say, forums for football clubs! — to push ads to them. And, of course, on the pre-Google days, having a “portal” where you could place a lot of information and attract a lot of people looking for an “entry site” to the Internet, was also a huge business. Yahoo is definitely the mind-child of this latter model.
When we reached the end of the millennium, however, things started to change dramatically: all bets were off on what was going to be the “best” model for “making money on the Internet”. Spam was invented. VoIP started to become commonplace, after people like our own Philip “Linden” Rosedale invented audio streaming. What was awkwardly named “push media” was born back then — we just call it RSS these days, or Blackberry if it’s on your mobile phone. But there was a plethora of ideas around, and all were striving to become “the killer application of the Internet” — by investing millions.
Where did all that money come from?
Venture capital.
