Henrik Torstensson points out an article on BubbleGeneration called Companies Are Not Pimps. Their beef? LBS was holding a conference called Monetizing Social Networks.
Here’s BubbleGeneration’s take:
MBAs come to B-school wanting to do cool things – and they get crushed into thinking business is about “product” and “monetization”… It was, at least a little bit – in the industrial era… But that was yesterday… If there’s one single lesson you apply at the edge, let it be this: business models happen… What that really means is: we don’t “monetize” resources. We co-create and co-produce value… Monetize is an ugly word.
Well, this is just dumb. Okay, monetize is an ugly word, in the sense that it means turn into money. You don’t want to turn your users into money, Mr. Midas, you want them to compensate you for the value you are providing to them. There is nothing wrong with this. In fact, it seems sort of fair.
So: (1) create value, (2) get your customers to pay you. [Furiously trying not to bring up South Park Gnomes… failed.]
It’s amazing the value you can create if you don’t need to make any money. But unless you’re going to set up as a non-profit and get kind-hearted people to give you cash, you probably can’t create value for very long. While I believe people who are willing to create tons of value and not get paid for it are the secular equivalents of saints, I doubt that’s what BubbleGeneration meant.
Creating value is not enough. As the Economist notes,
A great paradox of the internet… is that a next big thing—web-mail then, social networking now—can indeed quickly become something that consumers expect from their favourite web portal. The non sequitur is to assume that the new service will be a revenue-generating business in its own right… Web-mail has certainly not become a business… Social networking appears to be similar.
Webmail and social networks create a ton of value. While it may be too soon to tell with social networks, webmail has certainly proved to not be especially “monetizable.” But, so what? It makes a little money, it’s incredibly useful, it’s great. But it shows that you can’t map value to money. The belief that value and money are inherently interchangeable is one of the great lies of our capitalist society.
I don’t believe that companies should be started with making money foremost in mind. They should be started with some way of solving a problem, making peoples’ lives better, resolving an inefficiency: some way of creating value. But after deciding to make the world a better place, the next question company founders need to ask themselves is “how will we make enough money to pay our developers, pay for our overhead, and provide a decent return to our investors for being foolish enough to believe in us?”
If you’re not creating value, well then you shouldn’t be in business. But if you don’t intend to monetize then what you’re doing wasn’t a business in the first place.