Over the past few years we have seen more and more tech start ups, a seemingly endless stream of beta services and applications. The vast majority of new start ups being offered free. Some of these are obviously financed by banner advertising sales, google, facebook and hotmail for example all have very obvious banner ads. Other services, are financed by offering a free basic services, to attract users but then charging once they start to need more space or more features, flickr or hotmail being a good examples. But there are other services that don’t seem to have any such advertising or charges, twitter or ping.fm for example. It could be that they are just playing a long game and building their business before introducing, advertising or a charge, or they could be charging in other ways, for example some free instant messaging services charge enterprises for connection to their integrated communications services, others services may see user or usage statistics, or may charge a shareware fee for using their technologies in other products.
But how will these business models, and the services they have produced be affected by the credit crunch? On his dot.life blog Rory Cellan-Jones the BBC’s technology correspondent suggests, in the past fews days there are sign that the economic slow down is starting to hit tech start ups. Rory describes an email circulating the tech community from Jason Calacanis, predicting the credit crunch to kill 50-80% of start ups in the next 18 months.
There is lots of talk of echos of the dot com boom and bust of 2000, and there are arguments that there are still venture capitalists with money to invest, and that these businesses are built on different business models.
But the question is with a failing stock market, and with both businesses and consumers feeling the pinch will these models still stand up to the pressure. It is often the case that advertising budgets are the first to go when times are hard, and while its unlikely that the likes of google or facebook will be hit how will the smaller start ups fair.
All this being said ‘necessity is the mother of invention’ and some of the biggest names in the tech industry today started off in bedrooms and garages with only a couple of people, a great idea and a passion to make it a reality.