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.

2 Responses to “Business model questions”

  1. C.N. Says:

    Ok, so a n00b might ask this question.

    On the other hand, saying “advertising”, “commerce”, or “subscription” doesn’t necessarily answer the question of how you might make any or all of those models work well in your particular business. In practice any of those general categories of ways of making money might involve more than one word’s worth of details to make it work well in a specific case, or to show that it will work well in that case.

    On the third hand 🙂 , I’m guessing when you’re on panels, audience members are attending because they think (or hope) you know something that they don’t know, that they want to find out. So a question that you think is stupid might be legitimate, if they really don’t already understand what the answer is and how it applies.

    On the fourth hand, maybe you should ask these questioners what they really want to know, to find out which questioners are really n00bs 🙂 , and which questioners are something else, and what that something else might be.

    On the fifth hand, I do think that sometimes I can learn a lot about a person’s approach to business by finding out something about how they think (or even know) their business can make money. Saying “don’t bother me with that stuff” might make me suspicious. But if you show that once your business is running it can, at the drop of a hat, make a probable profit through two out of three of your Big Three Internet Business Models, I might find that both confidence-inspiring and educational.

    Anyway, as for specific answers you might give, I think it would be perfectly reasonable for you to respond with any of the following:
    1. This panel is about RESTful PHP, can we please just stick to that for now? 🙂
    2. Exactly how Facebook apps split revenue (if that’s how you plan to make money.) [If this is stupid, try to keep your answer so short that the people whose attention you *want* won’t fall asleep or go away before you’re done.]
    3. Why even though we’ve already been through a big bubble-and-bust in Internet advertising, we can reasonably expect to make money selling advertising in certain settings on the Internet. What near-future (and even far-future?) trends in prices for Internet advertising we can expect to see.
    4. In 15 seconds or less, can you be more specific about what you want to know? [Unstated: Are you really just a n00b? Can you turn your question into a more useful question?]
    5. If there’s:
    A. Recession or economic expansion
    B. Fall or recovery of the US dollar
    C. [fill in the blank]
    Why people will keep/buy a subscription to our service.

  2. C.N. Says:

    I win! I’m the ONLY person posting comments to this blog willing to admit I can relate to a question that’s “a neon sign that the person is a n00b!”

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