Business model questions

December 1, 2007

Lately I’ve spoken on a lot of panels, and for some reason I always get asked: what is your business model? This is one of those questions that people think make them sound sophisticated and hard-nosed, when in fact it is a neon sign that the person is a n00b.

Basically there are only 3 business models that apply to consumer internet businesses:

1) Advertising
2) Commerce
3) Subscription

Seriously, that’s it. You can charge a relatively small number of people for the privilege of using your site; or you get a larger number of them to buy stuff that you’re selling; or you get them an even larger number to want to buy stuff that someone else is selling. It doesn’t take a genius to understand how this all works.

So what is it people really want to know? Do they want me to detail exactly how Facebook apps split revenue? Are they expressing fundamental skepticism about one of the standard business models (seems like most of the people who ask this question are suspicious of advertising in particular)? Are they seriously expecting me to whip out my revenue projections? Or it is just that the Web 2.0 blogs talk a lot about business models, and distant readers are picking up on that? Tell me what I’m missing here, because I feel like I’m not getting it.