Aside

Making Money via Mashups

Dial back a year or two and there were lots of questions about whether mashups supported a viable business model.

Concerns centered around: low barriers to entry, copyright issues and the risk of someone else owning the data. While all are legitimate concerns, none seems to have derailed the mashup phenomenon.

So what’s going on? Do developers no longer care about making money? Hardly.

Time has proven mashups to be a viable business model. The risks are still there, so don’t expect to see a mashup become the next Microsoft, but the rewards are very real as well.

Yes there are risks–the low barriers to entry, copyright issues and lack of control of the data mentioned above. Low barriers to entry work both ways, so while it may be easy for others to copy you, it did not take much for you to get started and generate first-mover awareness. If you are making money off of someone else’s data, you should expect to share the proceeds, but rationality seems to be prevailing after the recording industry’s counter-productive litigation barrage. Lastly, it is always a risk to build a business on things you don’t control, but without a lot of capital at risk, risk-adverse, nay-saying investors aren’t a big part of the equation. Yes, Amazon or Google might decide they can do the same thing you do, but with hundreds of great mashups, they can’t do them all. If you generate significant traffic, they might decide partnering or acquisition is the more appropriate strategy. There are worse outcomes.

Each of the three primary mashup business models–advertising, lead generation and transactional–shows promise. To the extent that you are able to surround your mashup with things that are not easily copied–brand, community, etc.–the better off you’ll be.

Advertising
At this point, advertising is the most fully exploited of the business models. This is largely due to the ease with which map data can be mashed with other types of data. Think Zillow, WeatherBonk, StripClubMaps, Wheel of Lunch and others. Maps, in fact, make up 45-50% of mashups. Map data is both highly useful and easily monetized because map data adds a very useful layer of locations and context. With half of all advertising dollars focused on local spends, mashup applications provide an ideal venue for reaching a local market. Toss AdSense into the mix, and you have the necessary delivery mechanism. In short, you have an entire system. Looking beyond maps, social networks seem the next great reservoir of opportunity, but rest assured that there will be others.

Lead Generation
You create a mashup site, and then refer people somewhere for a referral or affiliate fee. There are lots of affiliate models out there, and mashups are just another implementation of a tried and true business model. A couple of examples of lead generating mashups are: GeoPrism and eBay’s Dude, Where’s My Used Car.

Transactional
There aren’t as many mashups at this point that conduct actual transactions, but expect an increasing stream. Reliability, performance, scalability and all the other concerns of a transactional application are more relevant than with the other types of mashups. The transactional elements often cause transactional mashups to appear less obviously a mashup, so you could be using a mashup without even knowing it. Transactional mashups are also more likely to tread on the toes of someone else’s business model. Amazon Lite, a site that combined Amazon, iTunes and Netflix, got cease and desist letters and had to remove the iTunes and Netflix components. The conflict is more real even though, paradoxically, it is the only one of the models that directly generates revenue for the content owner.

The negatives aside, there is a lot of potential here, so expect more and more people to figure out how to make a go of it.

Summary
Mashups have come a long way in the past couple of years. There is clearly money to be made, although the risks of being forced out of business–in theory, at least–remain high. Content owners have learned that they cannot control everything and successful mashups only increase the underlying value of their content. Mashups generating significant revenue are likely to draw the attention of content owners and you will be expected to share–in fact, the terms of use often differentiate between commercial and non-commercial use. If the content owners don’t bug you until you are generating revenue, that’s more solution than problem.
The mashup environment will continue to evolve and change, opening new opportunities while closing off some others. The more you are able to build a brand or otherwise generate unique value around your mashup, the more staying power you’ll have down the road.

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