My friend Reihan Salam has an interesting piece in Slate
that nicely pulls together much of the discussion at Princeton's Computing in the Cloud
workshop last month. He argues that web startups that have cultivated a squeaky-clean image start to have difficulties when they start trying to monetize all the traffic they've generated. The most obvious example is Facebook's Beacon fiasco.
Reihan suggests that the "immaculate capitalism" of early-stage startups gives way to ordinary profit-seeking once companies face pressures to turn a profit. There's clearly something to this, but I think Reihan's time horizon might be a little bit too short. Keep in mind that even the mighty Google faced questions about its profitability as it stubbornly resisted
the pay-for-placement schemes that many other search engines adopted. Google's refusal to compromise the quality of its search results for short-term profits helped it build market share, and it ultimately found non-disruptive ways to monetize all of those eyeballs. Facebook and Wesabe are much younger companies, and so it's not too surprising that they haven't found the right model for monetizing their users. Ultimately, their reputation with users is their most valuable asset, and so it's smart business to safeguard that reputation, even at the cost of foregoing some short-term business opportunities.