Revisiting Make or Buy

Back in 1996, most community sites were unaware they needed things like free web pages, email, chat, and forums to be successful. When they found the need for a service or two, they’d build the software themselves. The rise of Hotmail, GeoCities, and AOL’s Instant Messenger changed all that. These were stand-alone success stories. They were widely copied.

Many sites, which still found the capital requirements for such services daunting (and didn’t think them strategic) found a simple solution to the problem. Instead of making the services themselves, they bought and linked. Outfits like and Critical Path were happy to do co-branding, and for the sites this was practically free money.

Now we’ve come full circle, or so Ed Petersen thinks. He’s president of in Seattle (be careful to use the dash or you’ll wind up in San Francisco), and he’s got a new proposition. Instead of taking your ad revenues (and co-branding), he’s offering a full suite of community applications for that strange currency known as cash.

“We don’t take ownership of the users, or the ad revenue, or content. We take a monthly fee,” he says. “You can buy the product outright, for a licensing fee of $5,000 and $500/month, or take the whole site for $25,000-$35,000, which includes the monthly maintenance. Then there’s an enterprise solution, for firms with multiple sites, and that can range to $250,000 for the life of the contract.”

What radio stations, newspaper sites, and vertical sites like get for their money is access to a suite of services. These include web page hosting, calendars, email lists, forums, free email, and (soon) chat along with something like instant messenger (they call it Agent X). You also get the accompanying business services like ad management, user reports, and (again, soon) a business directory feature.

Now that the value of these services is proven, Petersen figures sites that previously just offered them want to take back those revenues, and those who haven’t want to do things on their own terms. When you buy Union-Street services, their name disappears, he says. The only brand the customer sees is yours, and all the revenue goes to you.

The major problem I found wasn’t the software, but the risks in managing the services. Flame wars, security breaches, spammers, and customers’ lawyers all represent big threats to cash flow. These are threats that major players have learned to deal with, but dealing with them takes time and training.

“There is a risk in building a community that our customers do need to consider,” Petersen admitted. Union-Street will consult on those problems and bill it out hourly. They also have some standard forms and legal boilerplate you can use. “But with the legal side of it, it really goes through our customer’s legal counsel,” he admits.

But most of the outfits on Union-Street’s target client list have matured, Petersen thinks. “I think they’re making better choices now. They’re managing the information. You may want to remove bad comments from a discussion, rather than the whole thread. We provide all the management tools they need.”

If you’re ready to stop buying and go back to making community, in other words, now you can. Just be certain you’re ready.

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