The traditional business model goes something like this: identify an issue or problem needing to be solved, figure out how much it’s going to cost your business to provide a solution, determine the price you need to sell your product for to be profitable, discover if this value proposition is in line with what customers are willing to spend.

Here’s what social networking and Web 2.0 business “concepts” look like: identify a new way to use technology to connect people together, immediately seek funding, use other popular social networking platforms to generate buzz, hire business professionals to find a way to “monetize” this concept.

The new business concept places the work of figuring out the business model at the end of the process. This is the sort of innovation to business models by the technically-gifted that got us in trouble during the dot com bubble. The talent behind the software being created, and their dedication is by no means being downplayed. They are very creative and intelligent people in what they do. The problem with this  business concept is once again, it is being supported and found to have acceptable risk, by investment firms and VCs. It’s been almost 10 years since the dot com crash, I guess it’s time again soon.

Our “new economy”, based now not only on information and communication technology, but new financial instruments, appears to me that bubbles and crashes are going to be happening at alarming rates.

Is this the best we can do? Ready, shoot, aim. The race to be first on the Internet doesn’t guarantee instant success and first-mover advantages. Amazon took what, five years to make its first dollar of profit. Where’s Netscape now? Yeah, Netscape, the guys that launched the world wide web, that’s right. Twitter and FaceBook, money pits. MySpace is part of Fox Interactive, which in 2007 made a meager $10M in profit, and that was largely due to its deal with Google to “monetize” search results. There’s that word again. Before that, MySpace (and parent company News Corp.) had no idea how they were going to make money off the concept.

The “diffusion” of technology, especially Internet technology, virtually guarantees that its costs to consumers eventually, and rather quickly reaches zero. Adoption and imitation are the two main drivers of this phenomenon. In many cases, the cost of new technology to consumers is set at zero from the outset. Social networking sites are free! This leaves the challenge to making an Internet business profitable, well, quite challenging. Let software programmers keep on programming, but let the innovation of business models occur by people with some semblance of business savvy. I’m just saying… *shrug* The business concept of social networking sites is turning into the hippie movement of the 60’s where things should be free man, we’ll find some way to make money later. The “suits” are trying to keep us down, man. Ok, I wasn’t a hippie in the 60’s, I wasn’t even alive. But aren’t the suits still the ones coming in to save your hippie, free software loving butts? I love my G0ogle, but even Eric and Sergey stepped aside to let a suit come in and give it a monetary direction.

In part two of this episode, I will attempt to create pretty tables to categorize, describe, and explore some of the more relevant business mode…I mean concepts, found on the Internet today. Let’s see if we can guess which models are here to stay or a passing fad that might just lead us into the next tech bubble bursting.

It came as no surprise that most of the survey respondents it appears, focused on non-financial benefits of using immersive technology for their business needs. This is ok however if you subscribe to the balanced scorecard strategic management school of thought. The balanced scorecard looks at leading indicators (and only one trailing indicator) to try and determine the financial success and strategic alignment of a company’s activities with corporate strategic goals. So if we grabbed a page from the balanced scorecard here, maybe success of immersive Internet technologies can be deemed financially acceptable if it lends to improving internal business processes, or learning and growth performance indicators.

I appologize for the B-school flash back. Let’s get back to more straight forward talk. Obviously this study looked to try and conclude if there was business value, financial or strategic, in using in any way, virtual worlds. The take home message I got from the study was that while there’s signs of value for internal business use, there’s very little applicable or practical value for affecting gross sales (the top line you might say).

What this means to me, is that such immersive technology is part of our growing internal IT costs and investments. I came across a statistic recently (shame on me for not noting it down) that said CIOs and CTOs spend approximately 80% of their capital budgets now on maintenance, hardware, and support contracts, and only 20% is spent on innovation or leading-edge projects. While the ThinkBalm study points out the low cost of implementation of such technology is a benefit, it would certainly be nice to find something that reduces IT expenses, instead of adds to them.

If you are an IT manager, looking for new ways to draw your globally-dispersed teams closer together, immersive technology might be worth experimenting with. It will not replace current web conferencing tools however. Such 2D applications still possess much better collaboration tools and shorter learning curves (as well as require lower-end hardware workstations). But I will continue to explore our metaverse, looking for opportunities to put some figures up against that top line, or if you are a one-person business entrepreneur, help give you some new tools to analyze your business environment.

The full 36-page study can be found at this location.