Does a market exist in your niche?

Pic: TeeJe

Traditional business advice suggests that in order to make money from a venture, you must see a market where money is being traded and then provide a service/product that can take advantage of this market.

Today, we hear that business plans suck and that it is better to judge the value of your proposition using metrics and conversions.  One such business model may involve gaining users through good experience and referral. And the last part should be eventually making money by turning these users into profitable revenue.

This is not the same as seeing a market and entering it somehow.  And the result may be that you have a massive audience without any intention of exchanging money.  You just have to look at MySpace and Facebook‘s current situation where the size of their userbase does not result in the revenue that you would expect from traditional business’s user/revenue ratios.  Facebook currently earns about $300 million a year despite being one of the busiest sites in the world with 140 million active users.  As a contrast, Google made over $20 billion in 2008.

There is money to be made from the 0.01% CTR’s that are common on community sites if the number of users is very high.

But to consider your community site a real business, it is important to take a step back from your current perspective and start thinking in a more traditional sense.  In your niche, where do you see money changing hands?  If you cannot see money, broaden your search until you do.  When you see something, perhaps this is where you should be aiming for in your business model.  Or at least, this is where you should see the real value for your business and you should align this with a good experience for your users/customers.

Otherwise you can create a market for your community after it has grown substantially.  You don’t see money trading hands?  Then, give them a reason to part with their money – by providing excellent premium features that they need, fun stuff that they enjoy doing or why not learn more about retail and start a shop?

Related posts:

1. Rethinking Advertising on Social Networks
2. Faciliating and Encouraging User Generated Content