The abundance of web applications is incredible. For most problems you will face online, a quick search in Google is very likely to turn up a web application that can solve the problem you are facing, on a wide range of platforms. If you are a hacker, dev, or SEO, and there ISN’T a solution to your problem, chances are you’re rushing to build one and claim the niche as your own. On the web, a problem is really an opportunity.

The popularity of APIs was a tremendous catalyst for the creation of web apps. For each popular web service that is released, a race begins to create every variation of widget, API extention and web tool that a smart developer can think of - it’s an amazing symbiotic relationship for both the company that releases the API, and the developers who can build companies from it.

This raises a question for the developers of web apps though - is your tool a monetizeable asset that you can build into a business, or simply a gift to the internet for which you will incur the costs? Is this tool going to become your startup, or just one in a number of tools you are launching? The best way to find out is to write a quick business plan that includes estimations of your costs, and revenues.

• Operating Expenses - hosting fees, API usage fees, marketing costs
• Revenues - advertising revenue, affiliate revenue, user fees, referral revenue

Most of these tools fall into one of several categories, see which one you should fall in, so that you can get the most out of your contribution.

100% Free

Most applications will (or should) fall into this category, because the market for most web apps tends to be small. Creators should be realistic about the size of their market. How large is the user base of the parent community? What percentage of those users will need to use your application? What percentage of that percentage will find your application through your marketing efforts? Creators of free apps can often benefit from their association with the application. A successful and useful web app is a good opportunity to promote yourself or your company for offering the service, and to use the referrals to your other core businesses to gain monetization. The notoriety that comes from running the application can make you an authority in the community, and can lead to profitable referrals or consulting work driven to your parent company or blog. A web app can be the thing that gains you credibility and name recognition, especially at conferences.

If the negative cost outweighs the benefits for you, then you should consider that you aren’t the right person to build this web application, and give your idea to the community where somebody else will pick it up. It is unfortunate when a good application is created, but eventually becomes slow and unusable when the developer cannot afford to support the traffic. Plan for this! While you may be excited to build your idea, is it worth it to become successful and then have to shut down?

Advertising Supported

Creators should put some consideration into whether to add advertising to their applications. While it is very easy to add Adsense to your application, consider whether your application lends itself to contextual advertising. Often a good application can be left unused because their developers have tried to place advertising on them in a way that doesn’t make sense, ruins the user experience, or makes the user feel like they are being taken advantage of. If you are going to build an application and you require advertising revenue to monetize it, make sure you plan for well placed advertisements which will benefit from high CTRs.

Advertising As A Business Model

Some of the most successful apps are mashups which combine a useful functionality with a CPA or revenue share point of sale. If you are developing this type of application, be sure that your idea is equally as useful to your users, as it is to you for making sales. A widget that sells books on Amazon will only be successful if it gives an added benefit to the people who use it. Just as a useful application should measure the amount of advertising it places, a good sales tool should measure the amount of benefit it adds to the user.

Case Study: TwitterCard

I recently became enamored with Twitter, and wanted to create a 125×125 graphic which would fit well into my blog design, and let others know about what I tweet about so that they can follow me. I couldn’t find any other widgets that did the job I wanted, so I registered TwitterCard.com.

At this point I quickly wrote out my estimated costs, and considered what monetization opportunities existed. I was sure that I did not want to include advertising on TwitterCard, as it will have a small market at best. I determined that hosting the app would be cheap enough that I could absorb the costs into my existing hosting fees. TwitterCard includes a link to my blog at the bottom, and a link to my Twitter profile as the example card, so the benefit I get from it is to make more contacts, and bring people into my blog.

More Reading: How Are We Going To Make Money? [howtosplitanatom.com]