"Purpose-Driven" Web Companies Continue to Rise

"Purpose-Driven" Web Companies Continue to Rise
The New York Times

By Ross Fadner, April 3, 2006

The most successful new media companies have been "purpose-driven," writes The New York Times, meaning the services they provide have outweighed the importance on making money -- at least at the outset. Google, Yahoo and Craigslist all started out in a similar fashion, focusing on strong "purpose-driven" products like search, a hub for information and content and free classifieds. Of course, each of these Web companies went on to become masters of online advertising, making them the media giants they are today.

The Times article points to a new breed of "purpose driven" Web companies, LaLa.com and Chowhound.com, recently purchased by CNET Networks. LaLa's genius lies in understanding that despite the hype over digital music, 90 percent of music industry revenue still comes from CD sales. They've introduced a CD swapping service that lets its users trade used CDs for $1 a pop, including postage. To get in the good graces of the music industry, the company voluntarily kicks back 20 percent of each dollar to artists, and keeps the other 31 cents (49 cents goes to postage). LaLa's founder points out that paying $1 for a used CD is still considerably cheaper than buying a used CD in a record store. By comparison, Chowhound.com, a nine-year-old user-generated restaurant review site, has refused to accept restaurant advertising, relying instead on donations. Obviously, this is no way to make money, and will likely change now that CNET is in charge, as that company's sites are full of ads.