Baddazz recently brought up a great question asking how http://gloto.com will make money.

From the Gloto FAQ:

"How do you make money? At this writing, we don't. We are evaluating various business models that include advertising, glip sponsorships and holding up convenience stores. Our current model is to buy lottery tickets. Our belief is that with an increased user base a revenue model will emerge that will keep Gloto free to the user."

This is a frightening DOT.COMesque trend I've been seeing in recent years where venture capitalists are pouring in their precious moola before even a proper business model is developed. Kind of that "if you build it, they will come" mentality. For example, I watched there.com nearly tank itself as a result of this- they gathered more than $33 million from their employees & friends & operated for about 4 years of development & then struggled for months over how to charge for their service, ending up firing a lot of people & selling themselves off cheaply to a boardmember & friend who started a new company so as to not have to take on the there.com debts.

The Facebook guy just turned down $1billion offers from yahoo & viacom to buy out Facebook. He started out getting handed $12.7million by the guy who invested in napster because he made buddies with the napster dude. From what I can tell, facebook doesn't have much of a revenue model either. http://www.fastcompany.com/magazine/115/open_features-hacker-dropout-ceo.html

Many companies without a revenue model have have rich friends to finance them. They hope to drum up enough buzz on their brand that people are willing to pay money for services & others pay big bucks to advertise with them, or they just go bankrupt. Just makes me think of folks I knew who wracked up their credit cards buying everything new & flashy saying, "We'll figure out how to pay for it later." The big difference tho, is that they are personally liable for their debts. These new startups can act irresponsibly in development of their business because they have rich friends & they have built in limited liability.

And don't you pay attention that we just incorporated in March. Limiting my liabilities just like everybody else! I'm hoping the difference in my ethics will be that we are self-funded... um, for the moment. And that at least is driving me to create a draft of business model early on. When I stop procrastinating on http://greatgamesexperiment.com & http://facebook.com that is. Hee hee!

Oh, and check out this seminar on this topic: "No Plan, No Capital, No Model…No Problem: Companies that Defied What VCs Will Tell You." - http://blog.guykawasaki.com/2007/06/churchill_club_.html