MindFrenzy

To many people go out there and start websites with the focus on money. I mean its understandable everybody wants another income stream or if your in college or graduating you most likely need cash flow.  It also seems like every single person who asks about your project asks “how are you going to make money?”. Again its easy to see why, I mean you need money to live and especially if your just getting out of college. However there is so much more to starting a website then making money. I don’t think it should be the last thing on your mind but I DO NOT think it should be near the top.

Look at some of the most popular services on the web today Stumbleupon, Facebook, Myspace, Digg. They are all free yet they are all worth millions because they are simply a valuable asset.

Facebook got valued around the 1 billion dollar mark a couple years back and this was before they even had a revenue stream. Now they sell advertising but I still doubt that one ad per page that asks if your single is bringing in hundreds of millions each year. Do you thinkDigg sells enough t-shirts through those ads on the site to justify the valuations ranging from $100-200million?  They both simply created assets.

This is the new strategy that more and more websites are following.  Less charges for services and more of a focus on developing a community and a following. Now this may not seem like fun because obviously there isn’t much cash flow and it may take years for you to develop a community around your site that will make it a valuable asset. However it’s not supposed to be easy.  Because its not easy that’s why there are 100’s of millions of dollar valuations for these communities. These are of course the best of the best on the web right now but that doesn’t mean there aren’t thousands of web communities out there that could get million dollar offers or hundreds of thousands.

So while everyone else is looking for a way to charge their users take the lesser traveled path and try to develop a community. Its risky and doesn’t offer that all important cash flow but again if it was easy everyone would be doing it.

Here are 5 things to look at before considering what your revenue stream could or is going to be.

1. You need a damn good service

This seems like the most obvious but its true, you can’t just assume people are going to pay for whatever you are trying to sell them. Most information can be found for free somewhere on the web today. It’s becoming harder and harder to charge for web services so whatever your service is it better be damn good.

2. Need funding?

You have to realize before you start charging for your service if you need funding to get it where you want it to be. Don’t invest as much as you can at the start to get the beta up just so you can start charging people to fund the rest of the site. You may want to offer free services to start to draw people in that may pay for more upgraded services later. One of the amazing things about the web is how you can start a business before its even finished but don’t abuse this by charging because people will still notice the rough edges on a project.

3. Competition

Good old fashion research comes in here.  What do your competitors offer? How are you different? How are you better? Can someone offer this for free? The last question here is the big one. You have to look at the industry and see if someone could or is likely to come in the near future and offer a similar service for free. If you are the first one offering a service for free it becomes pretty hard for competitors to undercut you!

4. People have to know about you

Even if you have a great service that is free it will be very difficult for people to find you. You have to know how your going to stand out in the cyber world. If people can’t find you they won’t even be using your free service.

5. Target

When marketing its best to have a target market.  Even if you say that your business appeals to all there should be a specific group that will help get it jump started. You not only need to clearly define this group but then clearly define that path you will use to reach them. When you do this also keep in mind what this group is and if they have the extra income and can likely afford to use whatever your service might be.

If you have clear answers to these 5 things then it may be time to consider the revenue streams for your website. Just don’t be greedy or it can come back to bite you in this web 2.0 age.