If you haven’t heard of Meebo by now, you’re behind the curve. I’m not suggesting that Meebo is right for everyone, everytime (I use the AIM client on my laptop and Meebo only when on the go), but Meebo is one of the admittedly few “Web 2.0″ companies that has built and refined a product that truly fulfills a need for a lot of people.

Just like the telephone is about talking with people, IM is about chatting with people. The telephone “just works”, IM should too. Yet the major players like AOL and Yahoo! are clouding the IM experience by bloating their clients with whizbang features and add-ons. Meebo, instead, has been committed to ensuring that IM is simple and universally accessible.

A friend of mine, having just discovered Meebo himself, asked me about how the company makes money. He noticed that they do not charge for the service nor serve any ads. I responded to him that as far as I knew they have not made a dime. They have, however, raised plenty of money from top-tier VC’s so they surely will have time to explore various revenue streams. In Meebo’s most recent message to its users, CEO Seth Sternberg, states that:

We’re looking forward to exploring three ways to generate revenue from meebo: advertising (no “punch the monkey” banners), allowing our user community to personalize meebo (similar to Cyworld’s approach in Korea or QQ’s in China), and distributing other services that directly monetize (like sending IMs over the SMS networks).

Let’s review each of these three ideas that Seth states:

Advertising - Contextual advertising is not going to work. Determining what ads are relevant to a conversation is pretty hopeless. Moreover, I think users will find it very creepy if Big Brother is monitoring their conversations and serving up ads in response to the topic. Run a CPM campaign? Sure, but be prepared for abysmal, MySpace-like ad rates. Content is unpredictable, targeting is low, and Meebo often lives in the background of a user’s session. Serve an ad and there’s a good chance the user’s eyeballs never see it. I suppose a solution to this problem would be to serve new ad impressions only when there is a new incoming or outgoing message. Still though, some money can be made through traditional advertising, but not a lot and what’s worse is that it has a negative impact on the user experience.

Allowing users to customize Meebo…for a price - Seth cites CyWorld as an example of where users in a community pay to customize/personalize their profile. CyWorld has been wildly successful in getting its users to pay for all sorts of additions - from clothing to decorations to background music - for their own virtual world (think “The Sims”) called their “minihompy”. Customizing profiles is nothing new. On MySpace, if you haven’t customized your profile, you’re an uncool newbie. Our profile in a social community like CyWorld and MySpace is a direct expression of ourselves. Every one of us wants to express our own uniqueness, and customizations allow us that ability. Just as in real life, plenty of people are happy to open up their wallets in the name of self-expression. On the flip side, all IM clients allow customization to some degree. Few users take advantage of it. Furthermore, even if Meebo allows fancy customizations, they will likely only be viewable by other Meebo users, not users of other IM clients. I can see maybe 5% of users (Meebo addicts) spending on average $10/year to customize their Meebo experience, but, unlike in social networking communities, I just don’t see a big market here.

Distributing other services that directly monetize - I’m not sure exactly what Seth has in mind for this one. He says “like sending IM’s over the SMS network”? Yes, most carriers offer SMS-based IM functionality on their networks. And, yes, the carriers are making lots of money from all the SMS fees incurred by users as a result of their IM usage. So how will Meebo fit into this? I’m not sure. Meebo will not make any money from user’s sending IM’s to mobile users. For example, Teleflip allows you to conveniently send messages to SMS uses for free. Teleflip does not make any money (they receive no kickback from the carrier nor have they chosen to insert ads into messages). I could be wrong here, but I don’t see how Meebo can make money from SMS. What might be interesting is enabling VOIP telephony over Meebo, but while I can think of some use cases for this I think the demand for this would generally be questionable.

To me, the right strategy for Meebo is pretty clear: the desktop. Meebo, and IM clients in general, are very unique in that the user is “stuck” to it for their entire online session. Personally, whenever I’m online, I’m logged into my IM accounts. E-mail clients are probably the only rival in terms of session stickiness. Let’s look at the stats from their recent press release: average session is 70 minutes, users spend a collective total of 165 years on Meebo every single day. Because Meebo is so sticky and because Meebo is one of the cornerstones of a Meebo user’s online experience, Meebo can take control of a user’s online interaction - acting as a gateway to other information and services. In other words, it can become an excellent online desktop (the popular term is “ajax desktop”).

To expand Meebo’s reach, the company has partnered with other companies that have ajax desktop products such as Netvibes and Microsoft Windows Live. While this is certainly a good strategy for Meebo to get more users, I have got to believe that Meebo’s long-term intent is to compete directly with these companies. I expect Meebo to come out with add-on widgets as you would see on any typical ajax desktop product: RSS reader, PIM functions, search, etc. With increased content comes increased advertising opportunities. Not only can Meebo run traditional ads, they will also be able to establish affiliate marketing agreements (e.g. eBay/Shopping.com for shopping).

Beyond simply advertising opportunities, owning the desktop gives immense leveraging power. As Microsoft proved many times over with Windows, companies will pay big bucks to be available by default on new desktops. Netvibes already charges companies to include their widgets in Netvibes.

So where is the billion dollar business in all of this? To be honest, I can’t define it right now. Clearly, though, right now and into the future, companies will increasingly be fighting for eyeballs. Meebo will be able to provide that to other services in spades. More importantly, Meebo has the attention of it’s user’s eyeballs not seconds or even minutes in a session. We’re talking hours. That’s extraordinarily valuable. More valuable than we can even appreciate today.