Business Models

 

A business model is a blueprint of how a business intents to make a profit.  Basic elements include (1) what are you offering, (2) who and (3) how.   Keep it simple, and focus on the key elements, all the time showing money flows.

 

 

Table of Contents:

Business Models Business model analysis Industry - specific analysis Kookyplan analysis of various models: Internet-based Business Models Advertising - supported Internet business models Types of Ad-based strategies Affiliate Business Models Brokerage Models Community Business Models Click per discussion Infomediary Business Models The Freemium model mashups Merchant Business Models Manufacturer Direct Models Pay for contribution Business Models Subscription Business Models Utility Business Models Pyramid schemes More Internet-based business models Interesting ideas Links from KookyPlan:

 

 

Business model analysis

Have you ever wondered..."How in the heck does Xyz Company make money?". Think about google.com, or any of their online cousins... Do you have any idea about how they make money? If you are like me, and you enjoy thinking about various business models, then you might enjoy this new wiki-website. I am very hopeful that others might want to use this forum to discuss the pros and cons of various business models that are out there. Its been said that "The key to a companies success lies in creating value for its customers, and distinguishing itself from its competitors". How do these companies accomplish this task? This page is a wiki, so your welcome to say whatever you like....

 

Industry - specific analysis

 

For industry-specific analysis, please visit our Industry Analysis

 

 

Kookyplan analysis of various models:

 

• Advertising Business Models
• Affiliate Business Models 
• Auto industry innovations and new business models 
• Community Business Models 
• Consulting business models 
• Education business models 
• Financial Services business models 
• Furniture Industry business models
• Import Export business models 
• Infomediary Business Models 
• Internet-based business models 
• Market research business models 
• Merchant Business Models 
• Newspaper business models 
• Online Real Estate business models 
• Outsourcing business models 
• Real estate business models 
• Restaurant business models 
• Retail business models - B2C 
• Review business models 
• Subscription Business Models 
• Travel industry business models 
• Utility Business Models 
• business model reviews - USA 
• green business models 

 

 

Internet-based Business Models

 

"sliceholder" model. Designers submit their work and the marketplace votes on designs. The winning designers earn a "slice" of what the market likes. The company and its shareholders get a return, the designer gets a "slice" of the results of their product and the market gets what it likes.

 

 

Advertising - supported Internet business models

• These are the companies that set up a website and try to make their revenue off of the little ads that are placed along with the content. Some famous examples of companies that make money off of the advertising model are google and Yahoo

 

 

The majority of websites that try to make money off of advertising start off by using a product from google called adsense. This product is very simple to use, which allows individual websites to place ads on their site for very little effort. The drawback is that Google takes a good portion of the ad revenue (the actual amount is unknown.

 

The model - simplified

 

assume $1 per click on each ad.

assume that 1 person in each 100 will click on an ad.

so, if you want to make $30,000 per year off of ads, you will need 30,000 x 100 = 3 million visitors in a year

 

The problem is that many ads pay significantly less than $1 per click.

Also, not evey site is able to get 1 in 100 to click on the ads (many people find them annoying)

So, if the numbers are more like $0.50 per ad and just 1 in 200 click...

 

 

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. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.

 

Note: TV commercial advertising starts at $2.5 million for a Super Bowl Ad

Internet advertising still has along way to go!

 

Types of Ad-based strategies

 

Portal -- usually a search engine that may include varied content or services. A high volume of user traffic makes advertising profitable and permits further diversification of site services. A personalized portal allows customization of the interface and content to the user. A niche portal cultivates a well-defined user demographic. Yahoo

 

Classifieds -- list items for sale or wanted for purchase. Listing fees are common, but there also may be a membership fee. Monster.com , Craigslist.com, Match.com

 

User Registration -- content-based sites that are free to access but require users to register and provide demographic data. Registration allows inter-session tracking of user surfing habits and thereby generates data of potential value in targeted advertising campaigns. NY Times Digital

 

Query-based Paid Placement -- sells favorable link positioning (i.e., sponsored links) or advertising keyed to particular search terms in a user query, such as Overture's trademark "pay-for-performance" model. google, Overture

 

 

 

 

Contextual Advertising / Behavioral Marketing -- freeware developers who bundle adware with their product. For example, a browser extension that automates authentication and form fill-ins, also delivers advertising links or pop-ups as the user surfs the web. Contextual advertisers can sell targeted advertising based on an individual user's surfing activity. Claria

 

Content-Targeted Advertising -- pioneered by google, it extends the precision of search advertising to the rest of the web. Google identifies the meaning of a web page and then automatically delivers relevant ads when a user visits that page. google. For more information, click here Content Targeted Advertising

 

Intromercials -- animated full-screen ads placed at the entry of a site before a user reaches the intended content. CBS Marketwatch

 

Ultramercials -- interactive online ads that require the user to respond intermittently in order to wade through the message before reaching the intended content. Salon in cooperation with Mercedes-Benz

 

 

Affiliate Business Models

• These are the companies that not only sell products on their own website, but have also empowered other companies to sell the products for them. One good example is Amazon.com who was one of the pioneers of this practice. It is surprisingly easy to copy and paste their code into your website, and to make revenue off of each sale. Many websites set up as affiliate shops online and act as virtual store fronts for the actual vendor.

 

 

Brokerage Models

• Brokers bring buyers and sellers together and facilitate transactions. Brokers play a frequent role in business-to-business (B2B), business-to-consumer (B2C), or consumer-to-consumer (C2C) markets. Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary.

 

Community Business Models

• These are the sites such as Myspace.com and LinkedIn that are attempting to make money by letting users more efficiently interact with each other. With all of the fuss about social-networking these days, who hasn't wondered about "how these guys make money?"!

 

Click per discussion

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Infomediary Business Models

• These companies collect data about consumers and their consumption habits online. This information is extremely valuable to other companies, especially when carefully analyzed and used to target marketing campaigns. 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.

 

 

The Freemium model

• These are the companies that give you a free trial of their software (or website) but they don't give you access to all of the handy little features that you will quickly realize are quite necessary to really enjoy the website or software at all. The basic free service is free, but they charge for the "premium" package. Free + premium = Freemium

 

mashups

• These are the companies that make money by taking another companies service and adding features, repackaging it, and then attempting to re-sell it to consumers for a premium price. This is widely seen with companies that take a google product such as their maps, and then they add (mashup) different features such as overlaying weather forecasts or travel itineraries.

 

Merchant Business Models

• These are just the companies that are trying to sell products such as furniture, lamps, clothing, books, and so on. In theory the model is bland, but it is interesting to see what some merchants do in order to attract customers and pitch their goods in unique ways. The technology is always changing, and the ones that stay ahead of the game always have an advantage.

 

Manufacturer Direct Models

• The internet distribution of information has allowed many manufacturers the ability to go directly to their customers and sidestep the middlemen (wholesale and retail dealers). This is seen with Dell.com in the computer business and southwest.com in the airline industry. As the technology gets better and better we should see this trend continuing.

 

Pay for contribution Business Models

• websites that pay the community to contribute content

 

 

 

Subscription Business Models

• This is the dream of every ad-based website. Everyone on the internet would love to find a way to get their customers to pay a regular subscription month after month, year after year. Many companies are very creative in their attempts to convince customers to sign up for yearly subscription services. Good examples are Norton.com in the security business, and in the past America Online, although they have been forced away from the subscription model recently.

 

 

Utility Business Models

• These companies use a "pay as you go" approach. Unlike subscriber services, metered services are based on actual usage rates. Traditionally, metering has been used for essential services (e.g., electricity water, long-distance telephone services). Internet service providers (ISPs) in some parts of the world operate as utilities, charging customers for connection minutes, as opposed to the subscriber model common in the U.S

 

Pyramid schemes

 

 

 

 

 

More Internet-based business models

 

 

Web 2.0

is it true that all web2.0 business models are advertising supported. That depends which internet camp you are in. Is the internet all about software? Or is the internet all about media distribution? I am in the latter camp … and media distribution has been advertising supported for at least the last century. When you also consider that web2.0 attributes, such as social networks and community aggregation, only make advertising more lucrative by commanding more contextual application and a correspondingly higher CPM, then it makes sense that the web2.0 business model is advertising-based.

 

But what if the internet is about software development? In the absence of shrink wrapping, I think that software is no longer a product that you can sell for money. It is merely an enabler of user experience that helps people get things done. Increasingly, getting things done is about media consumption and community building. Basecamp aside, people are unwilling to pay for most consumer-facing applications. I wonder if that will ever change.

 

If you rewind the clock all the way back, ebay and amazon.com are web2.0 companies – they create networks to engender trust between buyers and sellers, they use reputation managers and recommendation engines, and they highlight simplicity in their business models (if not in their user interface). And yet, they don’t make money through advertising. Instead, they make money by taking a little off the top of transactions. Ebay aggregates buyers for sellers and amazon aggregates sellers for buyers, but their revenue is transaction-based. But again, the “user-customer” doesn’t pay for this, the “seller-customer does.”

 

I know that people scoff at advertising, but isn’t that where the business models need to be centered? Or do the business models even matter as long as yahoo and google are collecting the advertising dollars for us?

 

 

 

Interesting ideas

Suggest business ideas to others

 

 

 

 

 

Links from KookyPlan:

Industry Analysis , company statements,  value proposition, and unique competitve advantage