The Web is a tough place to do business

The economy is in rough shape these days. Nobody’s job seems secure, and no industry is safe, but the Web is an especially hard place to make a living.

Startups are scrambling with greater urgency than ever to find the cash to keep going – either in the form of investment (despite the fact that VC investing is way down) or through business models that could actually sustain them. Twitter might be exploring both – looking for more funding as rumors fly about how they might employ advertising.

Outside funding is only a stopgap, however, and self-sustaining business models for Internet-based businesses are hard to come by.

The Atlantic Monthly published a widely-discussed piece this month pondering the death of the New York Times, hypothetically before this summer. Many people predict the New York Times will go all-digital at some point because that’s the only way it can hope to survive, but the truth is the New York Times makes more money from its 1 million daily print readers than it does from its 20 million daily web visitors. Again, the web is a tough place to do business.

As a case in point, my Flickr Pro account expired a while back, and I delayed renewing it for months despite the fact that Flickr Pro only costs $24.95 a year. A year. It’s a fantastic service that I use regularly, and it costs a fraction over $2 a month. In the “real” world, this would be a no-brainer.

Just yesterday, for example, I spent $16 to park my car and another $6 for a very mediocre tuna sandwich. That’s what I paid because that’s just what what it costs. I’ve been conditioned to accept the fact that a few hours of parking in San Francisco costs me more than a paperback book, a CD or eight months of Flickr Pro.

Unfortunately, I’ve also been conditioned to believe that everything I do on the Internet should be free. I balk at $24.95 a year for Flickr or $2-3 dollars flat for an obviously killer iPhone app, when I know it’s a steal, when I have no problem dropping that and more on a some coffee I will pee out an hour later.

I can’t think of a single business in the “real” world that basically gives away a product as great as Flickr, Delicious, Evernote, Yelp, Adium (to randomly pick a few) or any of the others that are essential to my digital life, but that’s what we expect online businesses to do.

How did we get here, and is it working?