Why the Sheep Thowers Need Money

Ha. OReilly hates sheep.

Now, as Tim finally sighs and realizes that the “platform” is really about cheap thrills rather than serious thinking, as he realizes that the next wave of intelligent apps isn’t coming to facebook or the web, he throws his spawn 2.0 under the bus.

Your revolution is over, Mr. Lebowski

And yet, how different would Tim’s message have been if the Sheep Thrower bums were piling in $20B a year? It’s not like adsense is exactly honorable, and yet they’re not getting chastised. iphones aren’t really saving the planet, either. But Google and Apple are both popular, AND they’re making piles of money. Most of the web 2.0 success stories have forgotten the second profit part.

This lack of profits will not stand

What IF web 2.0 companies were making money? Tim would be off their back, the VCs would be off their back, and the best and brightest would be figuring out new important things to do.

But first, these developers need to make some money. Let’s not forget that Google.org was paid for out of advertisers pockets. After it went through the google margin extraction process.

Despite the cheerleaders for a Inevitably All-Free Internet, we know that [free + ads] can only occupy a percentage of the total buisness online. Just as [free + ads] account for an important, but limited percentage of real-life business, in the end, they can only account for a percentage of the online space, too. After all, the advertisers need hugely more revenue than they’re paying for ads.

And that huge revenue will grow faster in the digital space than in the physical. Duh. Mobile phone carriers have managed to make money off of transmitting bits. Other folks will figure out how to make more money from bits than clicks.

Buy an App, Save my Rug

Which means that the best and biggest products and the glorious new revenue streams are yet to come. We’re starting to realize that paying for iphone apps is not the worst thing, at least if they’re cheap enough. Maybe it’s even GOOD if the developers make a buck or two.

It won’t be long before Facebook/Myspace apps can have payment system, and we’re likely to see more and better apps as that space earns more than canabalistic ad money.

Definitely more phone, mac and pc software will be sold as soon as apps are delivered in an open iTunes Appstore version, and that won’t be long either. As these things start to come together, we may see the beginnings of open digital marketplace. And finally, at some point, online digital products will eventually eclipse ads in total revenue.

As as this happens, all the money coming IN to developers and companies might end up being used for good purposes. Lots of these new companies may inject fresh, helpful, useful, and thoughtful thinking into the business world and the planet. But they’ll need the cashto back it up.

So if we think about paying for digitalia as an enabler for a better future, instead of always focusing on free, then the best and brightest hippies may even win in the end. And I wouldn’t be surprised if they made their first $10M selling virtual sheep throwing before they embarked on curing world hunger. Lots the good stuff can start after you make the money.

(Disclaimer: We’re working on some new payment products, and we’d like to help.)