Stage6, the video sharing site from DivX, today has announced that it will be shutting down. Last month, Revver, another video site was on sale for $1M. We would expect to see more death tolls among social media startups, mainly from video companies with the high operating cost.
Users love UGC, however, who will pay the bill? The list of possible payers is quite short:
1) Users. No way! Internet is free, that's Internet culture. Subscription model won't work in general.
2) VC's. No kidding! VC's only pay for bait - baiting for high return exit. If there's no sight of exit, bait can never be meal.
3) M&A bidders. No hot seat on deal table. There are so many potential acquisition targets, but first, large media and enterprises need time to figure out new social media strategies. There's no enough fear factor to miss the deal.
4) Advertisers. Not falling love yet. Everyone dream to be the next Google until the advertisers buy in the idea. Advertising on social media is still a test tube business.
It's not the fault that social media startups could not figure out a viable business model. Simply because the business model doesn't exist. Google's longtail story is about timing - once the ad industry is ready, new business model can be sold and somebody will pay the bill.
Before the stone can be turned into gold, the social media game is abort surviving. I see three surviving strategies:
1) Lure larger bait and make pocket deep. Youtube won't fall even there's no clear business model. However, there's no many Googles for other whatever tubes.
2) Get a night job. VMIX just dumped its community and focused on its technology offering to NBC type of marquee accounts.
3) Tighten the belt. Lower burn rate in rich media is tough but doable. Joost and Vuze utilizing P2P technology are able to cut the bandwidth bill. Hulu gets its R&D in Beijing to cut the relatively low paychecks.
Stop talking about business model, it's time to focus on surviving before the web2.0 bubble bursts.
