In comparison to Web 1.0 startups of the 1990s, business startups of Web 2.0 companies are very different today. Over the past decade, there have been a number of dramatic changes in the factors that affect the starting cost of launching a web:
Hardware: Prices of hardware components continue to go down.
Software: The rise of open source technologies (e.g. Linux, Apache, MySQL, PHP (LAMP) have significantly reduced the cost of deploying a web application. The organization can focus specifically and only spend money on the relevant features needed for the business to operate.
Infrastructure: Large increase in capacity of data centers, hosting facilities and bandwidth bring down the operating costs of delivering web-based applications. Many providers offer affordable hosting packages today. Harnessing the power of cloud computing is one such example where they outsource their applications and data management to external vendors.
Marketing: Web 2.0 companies now primarily employ web-based marketing strategies (blogs, social media, viral marketing, etc.) to bring their products to the fore. Gone are the days of multi-million dollar commercials as organizations only pay for actual user clicks.
What all these means is that there is scalability to Web 2.0 organizations in terms of technologies and business models. As O’Reilly said, if the model for Web 1.0 companies was to “get big fast”, it’s now “small is the new big”. Larger software developing teams are not fundamental to the success of the company with faster ROI through reduced cost on expenses like hardware and TV commercials will see the business having a foot hold in the market as soon as possible.
Threadless.com is a market for designers (mostly hobbyist) around the world who sign up to design shirts which are sold internationally, splitting a small portion of product revenue per sale. Its integration with social networking tools ranging from blogs, rating and score systems, slogans, design challenges ($2500 prize money!!!), clubs, gift certificates etc provide cost-effective methods to enable scalability in its business model which makes the store renounced for high product quality and interaction with its community of users.
It also leverages the viral marketing prowess of twitter to “advertise” their shirts. Users have the chance to have top tweets emblazoned on T-shirts. Threadless is crowd-sourcing for shirt patterns by having users to nominate and vote for the Twitter messages that make it onto shirts.
“What’s interesting about this is allowing anybody with anything to say or quick wit to participate. “You don’t have to have an artistic bone in your body. We’re tapping into the commentary that’s already happened.” – Tom Ryan, CEO of Threadless
How it all began?
Everything began with only two designers (Jake Nickell and Jacob De Hart) almost a decade ago. Today, Threadless has collected tens of thousands of top designer contributions with about 80 employees since it first started. Their strategy of “the customer is the company” provides a big playing field for collaboration that is central to their business model. Their success story is also a case of competitive innovation leveraging the ‘doing more with less’ ethos.
A video introduction to Threadless