Why Web Startups Work Better as Divisions of Larger Companies.

Whatever 'Web 2.0' is or was, few organizations have lived and breathed the term as much as Zoho. Bringing office applications into the cloud for commercial and personal use is the most obvious example of this, but equally notable is all the hidden strategic and operational stuff which has brought Zoho, as of last week, to the landmark figure of one million users.

The business model, for example, is classic Nouveau Web. Build it to professional standards but give it away to individual users for free… and polish the product until it's capable of attracting serious Enterprise attention.

They were nimble, too, in turning the ship around when necessary. Zoho's suite was originally aimed squarely at small business. 'We want to be the IT department for small businesses', they said, and they zeroed in on that target. But when it transpired that education and individuals liked the technology just as much as business, the infrastructure just appeared, as if by magic, to serve cloud applications to a much more fractured market than originally envisioned.

The innovation cycle, pared down to weeks and months for new applications, should be recognized as every inch a textbook model as that of Facebook or Google. How do they pump out new capabilities and applications so fast? There are now 17 Zoho applications, 5 add-ons and 4 utilities. Not to mention weekly updates and upgrades, new integrations, format compatability upgrades, and goodness knows what else. Sometimes it seems like the Zoho.com homepage is updated more regularly than Boing Boing.

Their attitude to advertising, even, is tinged with fanatical, user-friendly zeal. When we asked technology evangelist Raju Vegesna whether Zoho would consider monetizing the suite through contextual advertizing, he scoffed at the idea, and made us feel like jerks for suggesting something which would distract his users for a moment or affect load times by a second or so.

They even advertize on TechMeme, for goodness sake, where all the opinion-makers hang out, in the ultra-hip form of highlighted/sponsored blog posts. While the competition buys Adsense to get branded on Sammy Spamalot's SEO Linkfarm, or wherever. These guys are just cool, get it?

Startups in the Web applications arena can take a lot of lessons from Zoho: its extremely rapid development cycle, its attitude to monetization and to PR. And, by no means least, the way it scaled. And this latter element owes a lot to the fact that Zoho does not stand alone.

Why Web Startups Work Better as Divisions of Larger Companies

Zoho is a division of AdventNet, a multi-focus software developer which sells OEM, other database software and a multitide of enterprise products, and has been kicking around the scene since the mid-nineties. Crucial in Zoho's success has been the presence of the parent company, which can pump manpower and financial resources into a blossoming start-up to mitigate against exploding servers, user downtime, and buggy applications. And hopefully do it as quickly as necessary, which today, for any Web service, means NOW.

Consumer-focused Web startups can potentially follow an exponential growth trajectory, but only if they are tuned in to their competitors and to what consumers want. Only if they are allowed, in other words, to remain being two guys with notebooks on temporary vacation from a serious Xbox addiction, who met at a keg-party and came up with some hair-brained Web service scheme. But who are steeped in the knowledge of the cutting-edge geek-landscape, and know exactly what it is that they would like to be able to do, but currently can't, with their browser.

Why Web Startups Work Better as Divisions of Larger Companies.

Whatever 'Web 2.0' is or was, few organizations have lived and breathed the term as much as Zoho. Bringing office applications into the cloud for commercial and personal use is the most obvious example of this, but equally notable is all the hidden strategic and operational stuff which has brought Zoho, as of last week, to the landmark figure of one million users.

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