Of all the obvious things floating on Internet, least obvious is that we are in big soup. Economically speaking. When bad economics is in full swing, assumptions we collected during great times are dangerous to hide behind.

Web2.0 companies relied heavily on advertisement as their preferred business model. With enough eyeballs we can convert enough visitors into meaningful revenue. That is turning out to be a wishful thinking. Online traffic is growing but revenue tied to incremental traffic is anything but satisfying.

Jeremy Liew, venture capitalist at Lightspeed Ventures, writes on Wall Street Journal, has a suggestion for web2.0 startups -

I predict that media buyers will focus on both a flight to quality and a flight to surety. This will benefit three types of startups: companies with large audiences, companies that sell direct-response advertising, and companies that offer valuable niche content.

He is urging companies to ratchet up their direct sales force. This is a classic twin-edged sword. Hiring sales staff is ugly expensive. Especially in times when companies want to cut their fixed cost.

Companies in this environment are better off aligning with networks who already have direct sales force. Partner with them and extend your lifeline.

Dominating niche is going to be key. This is true independent of economic environment. Niche strategy will help companies find new revenue streams. There are revenue streams which look convincing when viewed under the extreme focus of niche segment.  Application subscription, content based tools, virtual gifts, advertorials (something which Jeremy used in WSJ and managed to pitch two of his portfolio companies!) are some of the ways companies can extend revenue stream.

Doing the same thing and expecting different result… You have heard that before!

Zoho continues to amaze me with their useful and, at the same time, bleeding edge solutions. Latest holiday gift to come from Zoho family is a touch-less python code generator. In plain English, developers don’t have to look at code to convert Zoho application to deploy into Google App Engine. Zoho Creator will take care of all the underlying complexity.

This video captures this elegant cloud computing hack.

Monetization issue is gaining attention. With recession fears growing every day, time to critically review business model is here. Big social networking players are not shy about making tall claims. Here is a quick run down of how they did recently.

Myspace claimed important client - Cartier -  dispelling notion that MySpace user base is all run of the mill (read no class!). Myspace executives are claiming that 85% of MySpace’s audience is over 18. If that’s not surprising then check this claim - 40% of all Moms are on MySpace and more people making $100,000 or more are on the network. This should change how marketers view Myspace demographics.

Facebook is getting close to rolling out new profile interface. Monetization objectives are key in user interface design. This is clearly designed to optimize contextual ad rendering as well as engage users in persuasive commerce. Something to watch.

Google’s Orkut continues to strengthen their early lead in emerging market. Orkut has a strong lead in Brazil and India. Indian developers prefer Orkut over Facebook and Myspace. “73% of them said they had used Orkut, as compared to 35% for Facebook and 32% for MySpace.” (Evans Data Corp). Marketers looking towards emerging market should be creative about developing OpenSocial applications. App installs will provide better return in the short run.

Community oriented online services are still growing up in India market. Cellphone penetration is order of magnitude higher than PC based internet access.  For new applications, it’s natural to address mobile market before addressing still emerging PC based web services. Riding on that assumption, Mumbai based Webaroo launched SMSGupshup - a sms based community site.

Very few online platforms  are able to successfully marry mobile and PC based social community experience. Twitter has shown the way, it has strong community support but it’s suffering from scaling issues. SMSGupshup can really grow to have global userbase if they can expand their core offering. To go after bigger opportunity, they recently secured new round of venture financing, as reported by Pluggin.

$10 million expansion round was led by Helion Ventures and Charles River Ventures.

Industry vendors are betting on global mobile messaging revenue to reach US$165bn by 2011. Social networking experience is supposed to play critical role in increasing sms message volume.

For marketers this offers near real time engagement with target customer base. Younger demographics and precision targeting also puts this market at higher valuation compared to regular social network such as Orkut.