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5 Ways to Brave the Great Downturn of '08

Surviving the downturn
No doubt keeping the money flowing during a financial crisis is tough for many sectors of the economy, and Web 2.0 startups aren't excluded.

After all, some companies, such as social networking site TheLinkUp.com and video-on-demand provider Akimbo, didn't make it.

But the situation doesn't have to be as dire as reports often make it out, with experts saying there are a number of ways to keep your Web 2.0 company running -- and even position it for success -- despite the downturn.

#1: Concentrate on real value

When companies and consumers stop buying, it's more important than ever to have a product that meets a need.

"A core principle for survival, which in practice is far less common than it would seem, is being able to articulate clear customer value," Sean O'Driscoll, founder of CGT Consulting, and former general manager for community support at Microsoft (NASDAQ: MSFT), told InternetNews.com. "Too many Web 2.0 tech and/or solution providers lack a verifiable or differentiated value proposition."

O'Driscoll said many companies aim to do too many things and lose their focus. "The temptation is to be a tool and therefore have broad usage scenarios," he said. "They want clear value attached to a clear business goal, and preferably with proven success stories."

Anil Dash, chief evangelist for blogging software company Six Apart, said that when offering value, the product should be something worth paying a premium. "Make sure you have something valuable enough so that people will get out that credit card and write you a check," he told InternetNews.com. At Six Apart, corporate clients such as Jupitermedia, this site's parent company, rely on products such as Movable Type for its blogging platform.

Seth Sternberg, CEO of instant-messaging service Meebo, also viewed the downturn as an opportunity to offer value. "If your product is one that people need -- make people money, save people money, give them a key piece of functionality -- they need you even more now," Sternberg told InternetNews.com.

"Focus narrowly on your core capabilities," Sternberg advised. "Meebo's core is Web live communication, so we keep ourselves narrowly focused on that," he said. "It enables us to get better utilization out of our available resources."

For social networking giant Facebook, success in growing its user base has been due to the company's focus on allowing users to share and connect, which led to rapid success.

"Focus on something that people will love," Josh Elman, platform manager at Facebook, told InternetNews.com.

These days, Facebook is aiming to monetize its massive user base, a process that hasn't always gone entirely smoothly. Still, that doesn't mean that the company doesn't have sound advice on what advertisers are seeking.

"Make sure you're providing a verticalized advertising experience that they'll want to pay to reach," Facebook's Elman said.

#2: Aim for 18 months

Tim O'Shaughnessy's company, LivingSocial, launched in February as a tool on Facebook that enables users to review everything from movies and books to restaurants and beer. In July, the company secured $5 million in venture capital funding from Grotech Ventures and former AOL chairman Steve Case.

[cob:Special_Report]As a CEO at the helm of a Web 2.0 startup, O'Shaughnessy said he believes a key factor in outlasting the downturn is reducing cash burn as much as possible to get through the downturn -- whether that means reducing headcount or pushing a sales cycle earlier in the company's life.

"If you can live to fight to 18 months from now, you're going to come up and half of your competition will have died and gone out of business," he said.

According to Guy Kawasaki, venture capitalist at Garage Technology Ventures and co-founder of online media aggregator Alltop, running lean may mean reducing headcount in the business-development department.

"Fire the MBAs and business-development people," he told InternetNews.com. "In these times, there's no time or money for 'strategic' stuff. Every employee is either making it, selling it, collecting it or supporting it," Kawasaki explained.

Page 2: Talent on the cheap