[image url="http://static.businessinsider.com/image/cb7a6c79184a1f4a3024d300/image.jpg" link="lightbox" caption="" source="" alt="google wave" align="left" size="xlarge" nocrop="true" clear="true"]
What if, perish the thought, Google ran Wave like an actual business?Google Wave is potentially one of the most interesting things to happen to the Internet since, well, Google (GOOG). It has the potential to make online communications much, much more efficient. This represents significant economic value, as most business internal communications systems, well, suck.
Here’s a problem though: it doesn’t look like Google stands to make any money from it — or is much trying to, for that matter.
Google thinks it’s going to get enough brand sympathy and HR marketing, to justify the expense, as well as using it as a loss leader for Google Apps.
But as an exercise, let’s think about how Wave, Inc, and not Google Wave, would pursue revenue.
First of all, Wave is by design an open platform, and even an open protocol: anyone with an idle server and the wherewithal to compile open source code can set up their own Wave, and anyone with programming skills can create apps for Wave. This means that you can set up a business _on_ Wave, but Wave doesn’t get any money from that. Like other platforms such as YouTube, Facebook or Twitter, Wave stands to make less money than the people using it.
This can be a feature and not a bug: Windows software is much more money than Windows itself, and Windows wouldn’t be such a huge product without all that software.
Here are the ways in which I think Wave, Inc might make money, and I’m curious as to what other ideas you may have. I’ve ranked them from least to most exciting:
Corporate Wave. Plenty of businesses will want to set up internal waves as a means to improve productivity. Wave, Inc could provide a one-stop-shop solution to help businesses set up their own private waves.
Problem: this is a top-heavy business model, essentially consulting, which doesn’t scale well. Small businesses would just use free waves, which means going after large businesses, which means focusing on sales, consumer support, etc. Also, this business model doesn’t really have built-in unfair advantages: since Wave is open source, nothing would stop Oracle or IBM from building Wave businesses, and odds are they’d be better at it.
Semantic advertising. The semantic web is slowly, so slowly, coming. Since conversations on waves have to go through the server each time, a semantic engine could parse them on the fly and serve up relevant text ads. With enough data and training, a semantic engine could decipher <em>intent</em>, ie whether you’re talking about your trip to Thailand last summer, in which case ads would be useless, or whether you’re setting up a wave to plan a trip to Thailand with your friends, in which case ads for cheap flights and hotels are relevant. Intent is the reason why nobody clicks on ads in social networks but they do in search engines. A semantic engine would know that 99% of the times you’re waving an ad would be irrelevant at best. So 99% of the time people wouldn’t see ads at all. Wave, Inc might set this up on their own servers and allow others to set it up on theirs under a rev-share agreement.
Over the long term, Wave, Inc might also open an ad network, serving ads relevant to people’s profiles all over the web through “Sign In with Wave” accounts, or even let people create their own niche ad networks using Wave technology. This would be good for consumers since they would get few ads, and only relevant ones, good for advertisers since they’d get high clickthrough, and good for Wave, Inc, since they’d have a high quality, expensive inventory. This might be the thing that makes online ads something other than punishment for using stuff for free, but actually something useful and exciting.
Problem: semantic technology is still inchoate and execution would have to be flawless for people not to find it annoying and/or creepy.
Online Payments: Hype is returning to online payments now that Facebook is looking to it as its next big revenue stream. PayPal sucks now, and the Web has been yearning for its own currency for 15 years now. What makes Wave potentially transformative for online payments is that a wave can be embedded into any webpage as a widget, making one-click payments a breeze once people have linked their Wave accounts to their credit cards and are logged in. This could be the thing that makes micropayments (or rather, usage payments) finally take off.
Problems: online payments is already a crowded space with some big incumbents. Also, anything dealing with transferring money is a regulated business. But I think this could work: if Wave got as big as email, which it’s certainly got potential for, it would have the reach to put together a viable payments platform. Then, it would “just” have to execute flawlessly to out-PayPal PayPal.
What’s interesting about all these potential business models is that they’re not just idle fantasizing: even if Google doesn’t try to make money off of Wave, it’s possible to build these businesses as applications on top of Wave. (I do think they’ve thought about the semantic ads thing — I’ll be damned if they don’t already have a super-secret team of PhDs working on semantic ads for properties like Gmail already).
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