Archive of thenextweb.com
Written on 11th November 2008
7 COMMENTS 
Boris Veldhuijzen van Zanten, Serial Internet Entrepreneur
A few days ago I was watching a presentation in which 50 companies were asked about their online business model. They had been given only 5 options to choose from. As you can see in the graph on the right here 11% had a Subscription fee model, 24% got their revenue from Advertising, 22% had Single Copy sales and 3% used Registration fees.
Interestingly enough 39% of those companies picked ‘Different’ as their business model. I joked that maybe “None” would have been nearer to the truth.
That got me thinking though. How many business models are there on the web? Can they be categorized and determined? Are the possibilities endless or limited?
Luckily I won’t have to invent anything myself. Professor Michael Rappa, director of the Institute for Advanced Analytics at North Carolina State University, did all the necessary thinking and research and wrote a detailed document titled Business Models on the Web which describes the following models:
Brokerage
Brokers are market-makers: they bring buyers and sellers together and facilitate transactions.
Advertising
The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads.
Infomediary
Independently collected data about producers and their products are useful to consumers when considering a purchase. Some firms function as infomediaries (information intermediaries) assisting buyers and/or sellers understand a given market.
Merchant
Wholesalers and retailers of goods and services. Sales may be made based on list prices or through auction.
Manufacturer (Direct)
The manufacturer or “direct model”, it is predicated on the power of the web to allow a manufacturer (i.e., a company that creates a product or service) to reach buyers directly and thereby compress the distribution channel.
Affiliate
In contrast to the generalized portal, which seeks to drive a high volume of traffic to one site, the affiliate model, provides purchase opportunities wherever people may be surfing. It does this by offering financial incentives (in the form of a percentage of revenue) to affiliated partner sites.
Community
The viability of the community model is based on user loyalty. Users have a high investment in both time and emotion. Revenue can be based on the sale of ancillary products and services or voluntary contributions; or revenue may be tied to contextual advertising and subscriptions for premium services.
Subscription
Users are charged a periodic – daily, monthly or annual – fee to subscribe to a service.
Utility
The utility or “on-demand” model is based on metering usage, or a “pay as you go” approach.
The different models are explained in detail on his webpage and should be required reading for any Internet entrepreneur. Professor Rappa argues that these are the basic models but the list is not definitive or exhaustive. He writes “Internet business models continue to evolve. New and interesting variations can be expected in the future.”
If you think you know of another business model not present in this list, or a combination of models, please let us know in the comments.
Written on 13th July 2008
3 COMMENTS
Ernst-Jan Pfauth, editor in chief
Swedish video advertisement overlay service VideoPlaza has received €420,000 seed investment from Nordic VC Creandum and angels Henrik Torstensson and Magnus Hultman. VideoPlaza has been doing well – partnering up with Sweden’s number-three pay-TV station Kanal 5’s website and two other clients – and operates in a booming market.
CEO Sorosh Tavakoli
The Swedes watch 115% more online videos over the last year, so VideoPlaza has enough content to monetize. The money will be used for international expansion.
Earlier this week, the Wall Street Journal got two anonymous sources talking about YouTube’s failing advertisement strategy. The video giant generates 10 billion video views a day, but ‘only’ manages to make $200 million a year from advertising. Thus the Google-owned company might introduce pre and post-roll ads, said the sources to WSJ.
This YouTube story symbolizes the need for video sites to monetize their content. VideoPlaza – that offers overlay ads for Flash and Silverlight videos – will be one of many video ad start-ups that receive a financial boost. It’s time for them to fix those crappy business models.
By the way, VideoPlaza has an effective and friendly team page – good inspiration for yours.
Written on 2nd July 2008
4 COMMENTS
Ernst-Jan Pfauth, editor in chief
About a month ago I reported that Belgian newspaper publisher Copiepresse demanded that Google should pay €49 million to compensate for the damage listings in Google News had caused them. A weird case, and not just because Copiepresse can easily prevent these listings. What struck me the most was the old-fashioned attitude of the Belgian media company. Call me naive, but I expected the executives of traditional media companies to be visionary enough to realize Google News brings them nothing but traffic. Was I shocked back then, now I’m really amazed by the next step of Copiepresse: they’re suing the EU’s news aggregator NewsExplorer.
This aggregation service from the European Commission wants to help visitors to grasp cultural differences among the EU by showing articles from all countries concerning the same matter. This unique piece of technology is a bit too modern for the Copiepresse conservatives, who prefer officials that use scissors and scrap books to collect the latest European news – behind closed doors. Just imagine helping out citizens by publicly organizing news.
Forgive me my cynicism and lack of respect for traditional business models. It’s just plain frustrating to see a large media company trying to destroy an emerging world of news and information. Copiepresse fails to see threats to their business models as challenges and tries to keep us in a bygone age of information.
There are only two positive notes here: the court has tossed out the case, based on jurisdictional grounds (so there’s hope for Google too), and what goes around, comes around. A company that only sees threats in the digital revolution, will find itself dismantled in a few deccenia. The only thing that bothers me about that, is the waste of journalistic talent.
Written on 24th March 2008
6 COMMENTS
Reinout te Brake, online gaming expert
The last few days I had some time and look around over the Internet. As you know, there is a lot of news about companies like Facebook.com and Google. Their success is the motor of a whole industry, they are the fuel for lots of new business ventures. In loads of business-plans you will see entrepreneurs compare their ideas against that of these companies. It is very difficult to create and come up with something unique, I grant you that, but what is it that these companies mentioned above have in common? The answer is; simplicity! Already I hear loads of people wonder if I lost it, but let me assure you, I didn’t.
During the last years I have come in contact with many VC-companies and they all are looking for companies that look like Bebo.com, Facebook, Google and MySpace. The “why” is simple too, these companies re-present high valuations today and therefore the investors who backed these companies made a great “return of investment”. These VC companies contact me if I know entrepreneurs with similar good ideas. In most cases I do send them info about young companies that look for funding. And then it starts; benchmarking! The business plans are going to be compared to the successful companies of today. After a while I have come to believe that VC-companies want something they can understand and compare, they want it too; simplicity! (more…)
Written on 14th March 2008
2 COMMENTS
Jeroen Bakker,
Free, as in ‘for nothing’, is the theme of the latest issue of Wired. The issue, centered around ‘Free! Why $0.00 Is the Future of Business‘ by editor in chief Chris Anderson of The Long Tail fame, has sparked a long list of blog posts on every aspect of ‘free’. In this post I’d like to list some of my favorite ways of offering something to the market for free . Of course, lots of start-ups are focused on selling advertising directly or through Adsense, but there are other options to consider. The list isn’t complete of course, so please feel free to comment with other ideas!
Offer products for free and extract data from its use to sell
The best example I think is Newsgator. Newsgator offers several RSS readers and services (Newsgator, NetNewsWire, FeedDemon) and used to charge for them – they had actual revenue by charging for their products! Recently however, Newsgator decided to offer all readers for free. That way they gather a lot more data, which they will aggregate and offer as ‘attiontion data’ to publishers, journalists and other people interested in buzz. A risky way of transforming a business, but also one that could inspire a lot of other start-ups to rethink their sources of income.
If you want to learn more about this concept you should head over to the podcast section of Educators Corner by the Stanford Technology Ventures Program, where Mitch Kapor talks about his new start-up Foxmarks. Foxmarks enables users to synchronise different lists of bookmarks for free and plans to develop business cases on top of the many millions of bookmarks they aggregate through their product.
Offer the main product for free, charge for complementary products
This is the main thinking behind some of the recent acquisitions of open source products like MySQL. When you offer a product for free (MySQL), if you’re lucky, you’ll see a growing demand in your complementary products (like the servers that SUN offers).
Google is another great example: they need more pages to plave relevant ads on, so news, e-mail, search results, book pages, product search are great ways to serve more pages to more people and thus having more space to put ads on. For an excellent article on this, head over to Strategy+Business for ‘The Google Enigma‘ by Nicholas G. Carr.
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Written on 29th January 2008
2 COMMENTS
Tessa Sterkenburg,
Since online user generated content is picking up, newspapers get continuously slashed for their inability to adjust to modern times and the demise of the old media was predicted. Now it turns out that the old-fashioned publishers are still going strong.
Newspapers were late to the game because, for years, they had near monopolies and fat profit margins, and therefore weren’t pressured to innovate. In 2005, all newspapers were still earning most of their profits from the print versions, and young people turned away from papers, leaving newspapers with a declining reader base, and declining revenue potential.
Last week The Newspaper Association of America announced that a record number of readers visited U.S. online newspaper sites last year. The number of unique visitors to newspaper websites rose more than 6 percent to a monthly average of 60 million. Monthly visits climbed 9 percent in the fourth quarter from a year ago.
So, all is going well then and newspapers are finally becoming innovative news sources online. Indeed newspapers are making steps in the right direction. They are embracing RSS feeds and video, ask their best journalists for their online versions, make more content available for free and there is even some collaboration. I can’t help noticing however, that this news comes together with reports that the biggest growth group online today are the baby boomers… coincidence?
Maybe not. The Wall Street Journal recently announced that they will not go along with the trend and hold on to their subscription model. The reason: it pays them good money. Not only in subscription fees but particularly in advertising revenues. Their well-defined paying user group of affluent 50-year old male decision makers turns out to be an attractive group for advertisers. Great model.
Unfortunately, as a new generation of decision makers is approaching, it might not last.
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