Web-based businesses circa 2004

I met with Dave Panos and Andrew Busey of Pluck yesterday to learn more about their product and their company. Rather than go into the software (which I really like btw, combination RSS reader, bookmark manager, and simple collaboration tool), I wanted to share some of our thoughts about consumer-based web businesses circa 2004. We had a nice discussion about why it was different to launch a web-based business in today’s world versus the bubble period. It was even more interesting considering that Dave and Andrew were on their third or fourth startups, depending on how you count. Our conclusion was that it is so much easier and cheaper to build a web-based business today than in the early days of the Internet. OK, I am being master of the obvious, but I am interested to see what else you can add to the list below.

1. Critical Mass
During the bubble period, the promise and potential of the Internet was all around us. However, the critical mass was not there. Today, we have critical mass, a number of users that are experienced with the web. We have real broadband penetration (although not as high as Korea, for example). This obviously allows any new company to actually build a real business with real users that can throw off cash flow.

2. Technology/Experience
In the early years, people did not have off-the-shelf components and open standards like XML/SOAP to build web-based applications. If you wanted to build a chat program, you had to build the whole thing from scratch. In today’s world, you can pull an off-the-shelf component from an ISV or from the open source community, Jabber for example, and have chat instantly integrated in your product. Additionally, the developers 8 years ago were pioneering new applications and a new language. If you combine that same developer who is now seasoned with better technology, you get a great headstart in building new products. What used to take months now takes weeks to build. What used to cost millions now now costs a fraction of that. We have more capability built into the browser. Pluck and Onfolio, for example, are built and integrated into IE instead of being a separate application. We have toolbars galore built into IE. It works.

3. Business models
Andrew stressed the other main point which is that we know what business models work today versus yesterday. Paid search didn’t exist years ago. Today it is a multi-billion market. Portals were nowhere close to profitable and today they are. Companies like Yahoo, Google, Amazon, and EBay have become big enough to build a business around-they have an ecosystem-they are the gorillas of the web and entrepreneurs can launch products around them. Additionally, we know how to reach users better and measure success. We are not throwing money away on stupid advertising campaigns. The smart and seasoned entrepreneurs now have more outlets for guerilla marketing (blogger community is a new and great one).

Remember the old adage that pioneers get arrows in their backs? Well, many early entrepreneurs did fail. Luckily, today’s entrepreneurs have the hindsight and ability to soak in all of the expensive lessons learned from the past. Now that is a tremendous advantage, one that will only get better with time.