TechPulse 360

Crowdsourcing, the loosely organized, widely dispersed, largely autonomous method of harnessing the power of people on the Internet.

It is good for developing free encyclopedias and open-source software. But what sort of profits can it generate?

UTest will not have 97 percent margins, but it won't have 20 percent ones either, says CEO Doron Reuveni

The answer to that question may become clearer in the next year or so as companies continue to test the market. One worth watching is uTest, a startup bringing crowdsourcing to the software testing market.

UTest is growing rapidly. The Massachusetts company has now completed 500 debugging projects for companies that include Intuit, Microsoft and Google. That is up from 20 about six months ago.

CEO Doron Reuveni says the goal at present is to grow and not worry about turning a profit. Breakeven should come at the end of next year, though Reuveni won’t say what margins he anticipates.

“You’re not going to be a software company with margins of 97 percent,” he says. “We’re also not going to be IBM Global Services (with margins) at 20 percent.”

Where uTest falls in that broad range will be insightful. Other crowdsourcing companies, LiveOps for instance, have shown that chalking up substantial sales is possible.

But it is difficult to estimate how much revenue will fall to the bottom line.

That’s in part because UTest’s business model is anything but simple – despite the relatively simple concept of crowdsourcing. It pays its 18,000 testers in a variety of ways, including for the reports they file, the bugs they catch and the customer feedback they receive. Testers can make up to $4,000 a month.

At the same time, uTest charges customers monthly, quarterly or annual subscription fees, in addition to selling individual “testing cycles.”

If the average project cost a customer $9,000 (the cost of six testing cycles) and the average tester makes $2,000, making ends meet may be difficult. But if the business can scale, the results could easily swing in uTest’s favor.

With this in mind, it will be interesting to see what the company can achieve in a year. By then it will be easier to tell if crowdsourcing can scale.

Angel investor Ron Conway says real-time data is the next real big thing.

Real time data is a $5 billion opportunity, says Angel investor Ron Conway

Yet it might not produce Silicon Valley’s next Google. One or two monster companies will not dominate the market. Instead it will nurture a wide range of firms, Conway said Thursday at the Always On Summit and Stanford University.

Conway, one of Silicon Valley’s top angel investors, has been touting this latest investment theme for several months. But on Thursday he attached numbers to the market opportunity.

Today, real-time data is 1 percent to 2 percent of Web content. In three years, it will climb to 25 percent of the content on the Web, he said. That will make the market a $5 billion opportunity.

“I think this is the next multi-billion dollar market,” he said.

Conway didn’t say how real-time he expects investment returns to be. But with Twitter and other companies beginning to focus efforts on making money, perhaps the pay days won’t be as delayed as in the dot-com world of Web 1.0.