Is The Web Moving Towards the Blockbuster Business Model?

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Business 2.0 ran a short interview with Naval, Ravikant, the founder of HitForge, a tech incubator that operates more like a Hollywood studio. In the interview, Ravikant makes an interesting point.

The Web is the most hit-driven business the world has ever seen. The problem is finding that next hit.

And what a problem it is. Despite the pontification of gurus and pundits, there isn't an underlying formula for what works. It's not being first. It's not getting it right. Myspace wasn't the first social network. Google wasn't the first search engine. YouTube wasn't the first video sharing site. I'm not even sure any of them are the best. They sure don't have the best designs, and probably don't have the best technology either. What makes a hit on the web is as difficult to predict as what makes a Hollywood Blockbuster.

On the HitForge website, Ravikant seems to agree.

Web businesses are unpredictable despite the best of intentions and execution. We defy the traditional venture model by giving pooled stock across many of our projects, and by killing projects and starting fresh rather than chasing dead ends.

The major difference, of course, is that barriers to entry on the web are much lower than the barriers to entry in Hollywood. And blockbuster success could be more short-lived on the web, where switching costs are typically low and technology changes so rapidly that new competitors are often at a tech advantage.

What does all this mean? For entrepreneurs, it means your great skills and ideas may not translate into great success, even if you execute well. For investors, it means a more staged style of funding, and the need to try lots of things and kill off the ones that don't work. It means that entrepreneurship is less about gumption, and more about luck and timing. It means that profits aren't distributed evenly, but are heavily biased towards a few winners. And it means that you may want to think about opportunity costs before you spend too much time on that next web venture.