SXSW is officially two days under way, and it’s been a great time so far. After thousands of people stood in line for hours on Friday to get their badges, the real activity started yesterday. (Friday night really, but that’s a different story.)

I’ve been to two standout presentations so far: “Turning Projects into Revenue Generating Businesses,” and the opening plenary session with Kathy Sierra of CreatingPassionateUsers. Neither had obvious correlations to building sites in Drupal for NGO’s, but I was surprised by amount of crossover. It’s always good to get perspectives on your work from people far outside of your daily network of interactions.

The first presentation was a panel discussion with five people who have all built successful, profitable web sites. Conversation started with an overview of a variety of ad techniques and some other typical ways to try to make money online. The consensus? Among this group (minus a noteworthy detraction from an audience member who works for eBay), everyone seemed to be in agreement that sponsorships and direct partnerships were a much better way to go than other schemes like click-based advertising and affiliate programs.

Why? You’ve heard the story of the blogger who quits her job because she starts making so much ad revenue. But at five cents a click, she has a lot of traffic coming in by the time she starts thinking in that direction – or before she stops looking for grant money. Huffington Post, Engadget, et al aside, most blogs and websites stand to make more money by finding strategic partnerships with sponsors who recognize value in what the site is doing. Those kinds of sponsors are willing to spend money regardless of the number of clicks because they see supporting the site as something that will be mutually beneficial for both parties. Random click-based advertising might help make a dent in the hosting bills, but it’s not likely to move beyond that until your traffic crosses 100K hits a month.

Along with direct sponsorships, another surprisingly successful model for generating income is what panel moderator Ted Rheingold called “micro-sponsorships” – something like a virtual tip jar for websites that do good work. Video blogger Ze Frank created a program he called “Gimme Some Candy.” For anything from $10 to $250(!), users could buy little rubber ducky icons to leave for Ze on his site. Yep. You read that right. Just to say thanks for doing his thing, users would buy these icons and attach a little 20-30 word message with each one to let Ze (and other readers) know what they thought of his site. People bought tons of them, and not just the $10 version. On this page, I counted 56 $50 duckies and four $250 duckies in addition to a slew of the $10 version.

For non-profit organizations, the idea of creating a funding stream can be a daunting concept for a variety of reasons. Still, lots are agreeing that it’s worth pursuing, especially online. This micro-format idea could be a great way to help stimulate community interaction on your site and make some money to pay the hosting bills at the same time. Readers know that there’s nothing more going on here than a simple donation to the site. But rather than just leaving some money behind, they also get to leave a sign of their support for the site that is visible to other readers. People want to be recognized for being a part of the community, and this concept gives them that opportunity.

Kathy Sierra’s presentation was on a totally different subject. She has studied psychology and user experience, and the sum of her talk was essentially this: If someone’s self-confidence is diminished because they can’t figure out what to do on your website, they’re not likely to stick around for long and become faithful, passionate users.

So what do you do?

To start, you make sure that users can find what they need when they have a question. FAQs tend to address the kinds of questions that users have on a good day when they’re just looking for an extra bit of info or functionality from your website. But what about when they’re frustrated and can’t find what they need? Imagine if there were contextual help texts that anticipate what problems a user might be having on a given page, rather than sending the user off into a 5000-word vault of solutions to any and every question the site administrator can think of? (Have you seen some of the FAQ’s out there?!) Contextual helps that anticipate a user’s frustrations can make a huge difference in moving that users along to a place of comfort with using the site.

More generally, it was a good reminder to think like a user and not a site’s owner or builder or planner or writer… The best ideas for a site aren’t worth much if users can’t make sense of them quickly, with minimal explanation. With so much information on the internet and so many opportunities to get the information, most users don’t have a reason to stick around a figure out how to use a site that frustrates them at first. This is why, at Development Seed, we are interested in spending plenty of time planning ahead for projects, and then spending plenty of time doing bug testing and usability testing. Users need something that helps improve their lives if they’re going to keep using it.

And, for something completely different, check out Community Walkand the Electric Sheep Company. Then start imagining a world where Second Life mimicked every part of the physical world exactly, but provided you access to all kinds of extra information that you can’t gather with your five senses – like that your neighbor two blocks down is interested in the same stuff that you are, but you’ve never met him. But you could see it by walking by his house in Second Life. That world might be coming… :)

I’ll be reporting back with more at the end of the day. Next up: more on mapping, mobiles, and spam.

Also, if you're reading this and you're down here, let me know if you'd like to catch up. And are you Twittering? I am.