There’s a lot of money to be made in web development. Three examples I can think of just in the last few months are Draw Something, Instagram and Pinterest.
(I’m purposefully ignoring the Facebook IPO it’s been around for a while, wasn’t an overnight success and, besides, there’s a few legal wrangles going on there too.)
All three of these examples have made some people extremely rich. The value that is placed in these companies seems way bigger than the sum of their parts. It’s not like a manufacturing industry, where something is made, which can be sold for a price and therefore has real physical worth all these companies do is shift keels around and connect people together.
Let’s take a look at them one by one.
Draw Something
Draw Something is a game for the iPhone. It went on to the app store in late 2011, and within a few weeks had millions of players. It’s a simple game, based on Pictionary, where players have to guess what their opponent is drawing.
A simple idea, maddeningly addictive, and easy enough to conceive of, right? Well by any standards, the user interface is a bit shoddy, it’s easy to cheat by writing words on the screen (altough this is frowned upon), and the app is a bit rough around the edges.
So when Zynga, the company behind the Facebook game FarmVille (which, by the way is a genome on itself, with tens of millions of active players), announced that it was buying Draw Something for $200 million, it seemed like quite a shock. Loads of money for the developers, but what’s in it for Zynga? The game itself doesn’t make any money, there is some advertising on the app but surely not enough to cover that sort of price tag.
Well, the answer is, and this will crop up again and again, people.
If Zynga can tap into that database of players and (horrible word alert) monetise that process, they’ll be quids in. There’s a huge database of players who are avidly glued to the little iPhone screen, and if Zynga can get a few dollars from each one by persuading them to play FarmVille, the investment bec se worth it.
There’s no great new technology, no groundbreaking idea, just a fad that, if done right, Zynga can ride the crest of. Time is the issue here though: in the few months since Draw Something became a global smash, the numbers of people playing it have plummeted and if Zynga haven’t cashed in on that wave yet, it’s probably mostly spent by now.
Another success story came in the form of Instagram, which Facebook is buying for a billion dollars. A thousand million dollars. That is a lot. Especially considering that Instagram doesn’t have a way to make money yet. Not even advertising.
Instagram is a photo-sharing app. Its like Twitter for photos. You can follow your friends, or people who you think take the best photos and you can post your own photos for others to see. It comes with a bunch of filters and effects to allow you to jazz up your photos.
It recently launched an Android app to sit alongside the iPhone app, and has a user base of almost 40 million. So where’s the value? Lots of users, sure, but most Instagram users already have a Facebook account. So Facebook won’t be getting any more users. What it gets in this case is new networks.
People on Instagram are likely to follow not just their friends, as on Facebook, but users from all over the world. By using hashtags, like in Twitter, Instagram allows you to tell the rest of Instagram what your photo is about. So a particularly lovely snap of my dog Milo running down the beach could be tagged #dog #goldenretriever #beach. Other users who like pictures of dogs, or beaches, can search for that and, if they like what they see, can follow me.
Facebook is all about connecting friends, and Instagram is a means of connecting people into new friendships across the world. Still, worth a billion? Who knows.
Pinterest seems to be symptomatic of a lot of sharing sites, that fall under a grey area of the law. You can attach, or “pin” pictures of anything you like to Pinterest: interior design, posters, clothes, furniture, whatever. You can then group them however you like.
However, the grey area is in the Ts and Cs. By pinning something, you’re essentially saying that you have the copyright for it. In most cases, this isn’t so, but at the same time if your customers are pinning your product, then it’s great advertisement, so I don’t see anyone making a stand on this too.
I think Pinterest may be the next big sale for one of the big online players (Update: I was wrong, it was svpply.com, bought by eBay). How much for, I don’t know, but it will probably be way more than the observable value!
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