Economic value of community sites

This morning I saw an interesting article in Techcrunch about a possible Bebo acquisition offer which led to an interesting discussion about the real value of community websites.

All these community sites are usually obtaining money from advertising as their services are free, therefore it seems that the more users and the more pages per user viewed should lead to a bigger revenue and so to a bigger value. Well, as said in one of the comments, there are at least two reasons why this is not necessarily true.

On the one hand, the content is user driven, and thus you encounter a lot “indecent” information, photos, etc. Therefore, some advertisers may not want to appear in this context because it will go against their image.

On the other hand, as the design, layout and also the content is provided by users, adds will probably pass unperceived. You can try the exercise, when you go to a news site or a blog you are interested in, after having read all the information try to remember about the advertisers.

Anyways, we are talking about hundreds of millions of dollars. This looks like a lot to me but I guess, mainly because the unique real differentiator of these websites is usually the user database (technically they are not very complex and the content is provided by users), the barriers of entry are then low. You will of course need money to build your image and market your site. Obviously media companies don’t want to stay behind in the race and so they seem kind to invest big amounts of money.

I hope nobody has forgotten what happened 5 years ago …

Being an entrepreneur, pros and cons so far (in no special order)

Pros:

1. Motivation
   What can be more motivating that working on something you like for your own benefit?
2. Flexibility.
   You manage your time, you decide what, when and how. I love it. I probably appreciate it less than other people because my previous work was already very flexible.
3. Estimulates creativity
   Going trough the process of finding and building an idea requires a lot of creativity.
4. Estimulates concentration
   It is easy to waste a lot of time reading all sorts of stuff on the internet (Following the buzz)
5. Helps you meet other people with similar interests
   It is easy to get in touch with other entrepreneurs and have very interesting conversations about ways to find solutions for user problems.
6. Practical BA course
   You learn many different things about running a company. This is never going to be like an MBA (I guess) but I guess learning from the field also has its advantages.

Cons:

1. Too much work.
   This is not per say a con if you like what you are doing. However it limits the time you can spend doing other things, mainly take care of your family and friends.
2. Always on
   It is difficult to stop thinking about your business. I'll say I spend around 90% of my time thinking about it. I even dream about it! This is indeed very tiring.
3. Money
   Not that I care too much, but not only do you invest some money but you are also paid much less than you would earn working for someone else's company.