Is there any categorization or in-depth analysis of business models based on the Internet?


9

I was searching for some information, analyses and categorization for business models that are used in Internet-based businesses (basically: in the businesses that are conducted through the Internet).

I have found very valuable resources (eg. Michael Rappa's categorization of business models, Internet Business Models page ), but I am looking for more.

Do you know any credible source, any publication, about the categorization of business models on the Web, measurement of their efficiency, ability to become successful?

The more data, the more credible the data and the more sources, the better.

Also, if you have some personal thoughts about efficiency of Internet-based business models and you can share them, please do so.

Thanks

EDIT: As of today I decided to put a bounty on the question. The best answer will win. By best answer I understand pointing some previously unknown to me resources about some interesting study, categorization or measurement of successfulness of business models on the Internet.

Categorization is one thing, but the most value to me has data about the efficiency & ability to achieve success by specific business models. The more data, preferably followed by analysis, the better.

So, if anyone knows about any resources that could be helpful in analyzing ability to achieve success by different categories of business models on the web, it will be appreciated and eventually awarded a bounty from this question.

Thanks again

Resources Business Model Business Plan Business Internet

asked May 23 '11 at 10:00
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Tadeck
56 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll
  • +1 for setting the bar high for answers by including good intel right in the question. – Kenneth Vogt 8 years ago
  • @Kenneth I find the topic very interesting and I regret it did not gain enough attention to encourage more answers (the more valuable, the better). I am considering setting a bounty so this question can gain more attention (all answers, even already posted one, will be considered for awarding a bounty). – Tadeck 8 years ago
  • I don't think the variable is your chances of success with different business models - it's what situations each business model is best for and examples of how it can be applied successfully. There are many good business models but they have different requirements. – Richardg 8 years ago
  • @richardg Yes, I am aware the issue is complicated and different business models are suitable in different situations, plus can make profit on different things. Also different business models have different goals, thus 'ability to achieve success' can mean also something else than making profit (that happens if you eg. consider Wikipedia as a business). I find your voice valuable in the discussion, so +1 – Tadeck 8 years ago

5 Answers


9

I'm not sure it answers your question, but one "framework" that I use to analyse business positions is the Five Forces model of Michael Porter.

The five forces specifically give you a framework for deciding whether the business you're looking has some ability to be successful.

As with any framework, it has downsides, but I find any order you can put on an analysis helps to clarify the analysis (provided it's not completely antithetical to what you're trying to achieve).

Not really bounty-full, but here's some extra information:

  • The paper by Weill et al. is generic for the top 1000 US companies (so not specifically web-related), but it comes up with the conclusion:

    selling the right to use assets is more profitable and more highly valued by the market than selling ownership of assets.

    The paper goes on to talk about the four primary types of business model: Creator, Distributor, Landlord or Broker, and further subdivides these four by the type of asset involved: Financial, Physical, Intangible or Human.

    That gives a total of 16 business types:

  • The paper by Dubosson-Torbay et al. is more specifically about eBusiness, and takes quite a different approach: it breaks down a business into four "processes" (my wording) : Product Innovation, Customer Relationship, Infrastructure Management and Financial Aspects. It then investigates various examples of businesses, and looks at what they do in each "process" category.
I don't have too much more time to chase this, but I thought it would be interesting to cross-pollinate the two ideas from the papers above. The second paper has some example businesses: auctioneers, retailers and a CIO group.

They fit (my guess) into the framework from the first paper here:

And the way the second paper proposes measuring each of these three business areas is as below.

Product Innovation Customer Relationship Infrastructure Management Financial Aspects Conclusion There's lots of white space in that spreadsheet, and I don't really have time to prognosticate more. I've uploaded it to Google Docs, so you can download it for yourself if that'll help.

What'd I'd like to do next is to see what Porter says about the three examples I've filled in... but that's for another time.

answered May 23 '11 at 10:21
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Peter K.
377 points
  • @Peter Thank you, however I already know Porter's Five Forces concept. What I was searching for is more like a list of business model's types - the more comprehensive, the better. But I found your opinion valuable when it comes to estimating the efficiency / successfulness of the model. Thank you again. – Tadeck 8 years ago
  • @Tadeck: No worries. I'm off to do a but more research; if I find anything I'll update my answer. – Peter K. 8 years ago
  • @Peter I gave you +1. If you know any valuable sources on the topic (especially categorization or measuring the efficiency), please let me know. – Tadeck 8 years ago
  • +1 for mutually respectful conversation. – Kenneth Vogt 8 years ago
  • @Peter Thank you for you answer and please consider expanding your answer to try to get the bounty :) – Tadeck 8 years ago
  • Nice selection. – John Bogrand 8 years ago

8

Well "conducted through the internet" ... is pretty broad statement.

  • Google is all about the number of times they can get people to click on an ad link.
  • Facebook are similar but their success metric is the amount of time they hold peoples attention (google only have you a few mins at a time, facebook is hours at a time).
  • Evernote have subscribers volume with a 10% conversion to paid clients, given they have millions of users then its "dedicated user base" which they can work with long term.

So metric that you could select from when building an internent business

  • Impressions per day. If your collecting money through advertising impressions then this is a good one.
  • Unique Visitors per day. If you listen to This Week in Startups then you will hear this metric come up A LOT.
  • Returning visitors per day/week/month. For long term sustainablity of a lot of web properties this is key (like Facebook or Linkedin)
  • New Visitors VS returns. This is a good one to see if you have a high level of interest in the site. The stack exchange will probably use this as one of their key metrics
  • Severs per volume. How effecient are you, how fast can you scale. 1 server per 100 customers or 1 server per million customers is a big difference in your bottom line and your "need to rearchitect your system" point.
  • Customer issues resolution rate. Open VS closed. This is crticial in many businesses for long term survival ... in the online world it is more so because your customers are likely to discuss your performance good or bad.
  • Points per sprint. For development how many additional function points can you get through per release of your system.
  • Technical debt backlog. Tracking this is critical as is making sure it stays fairly low. Too low and you won't move forward fast enough, too high and you will hit a brick wall and risk a major failure "somewhere".
  • Staff turnover rate. Average months served is critical for long term consistancy especially on the technical side. A revolving door means nobody knows what is happening or where the technical debt is ... basically all your code base becomes technical debt.
  • Mentions in the press. Old fashioned desicrption but concept still applies. This translates to how many refereneces there are either to as links or to you as mentions. CAn be facebook, twitter, other poeople blogs, etc. There are tools which track this for you now.
  • Your google rank on your keywords.

General metrics for most businesses:

  • Profitablity. Every company has this one and its a cheap shot :)
  • Cost of customer aquisition VS value from customer. This says how effective your being at extracting money from the customer. Get this ratio wrong and your out of business quick.
  • Life time value of a customer. Do they buy your product once so everything is stacked against the first sale or do they come back / get subscription in which case the first sale can be given away in order to get the long term value from the customer.

There are heaps more once I get into the swing of them but most people have probably stopped reading by now ...

So for those that have made it this far the key thing you need to do is identify and track the ones that are important to you. Setup metrics / goals around each one so you have something to compare them to (is 50,000 a good number or not?) ... then the key magic bit is to normilise them somehow.

The easiest way is to setup ranges of expecatation per variable you are tracking:

Variable 1: (say unique visitors per day)

  • 1 to 100 is a 1
  • 101 to 200 is a 2
  • 201 to 5000 is a 3
  • 5001 to 50000 is a 4
  • 50001 to 500000 is a 5

etc.

Have about 5 - 10 buckets anymore starts to get meaningless (unless you use 100 which works well too). So now you have a common measure for all of your variables:

So you can then say

  • Profitablity is 2/5
  • Issue Resolution is 3/5
  • Average Time on site is 4/5

And you end up with my company is 3.5 on my magic "going well odometer"

ADDITIONAL BIT :

And to finish that thought off properly ... Instead of one overall metric I would break "internet companies" down into a series of subcatagories and then rank them against each other.

answered May 26 '11 at 18:00
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Robin Vessey
8,394 points
  • +1 for focusing on metrics and KPI's. – Laundro Mat 8 years ago
  • What metrics would you propose for Wikipedia-like entreprises? +1 for very valuable voice in the discussion anyway – Tadeck 8 years ago
  • Wikipedia have a specific positive side which is Growth of topics/number of contributors VS spam issue rate. They then have to balance the positive side against the number of servers, people and infrastructure it takes to make all that happen seeing they are not for profit there is also average donation rate you have to maintain or secure. – Robin Vessey 8 years ago
  • Thank you for your answer. I actually added next bounty so if you have anything else to add, it may be worth it :) – Tadeck 8 years ago

2

It will be interesting to see if there are any concise and well-researched resources for this. I would start by looking at a few dimensions:

  • Product or service (what you provide and/or how you provide it)
  • One-time payment or recurring (how you're paid)
  • Free (promotional), ad-supported, freemium, premium, or exclusive (the pricing level)

Based on various combinations of these you could categorize business models, such as a recurring subscription to receive exclusive (high-margin) products. There's probably some variation in success rates but that could be more about the people running the business than the business model. For example many people scared to charge full-price for something fail on the low-end of the pricing range because they aren't good at figuring out a business model, not because lower prices are a bad business model.

The success factors definitely will vary. With exclusive pricing your challenge is to make people want something no one else has (sometimes this could mean reducing volume). With low pricing your challenge is to get high volumes with optimized marketing. With one-time sales your challenge is to keep new people coming in; with recurring sales you challenge is to keep customers interested. If you have a lot of cheap labor services are efficient; if you have repeatable technological advantages products are efficient.

That said there are business models that have a very high chance of failure, like an unknown person getting extremely popular on youtube in order to launch a real-world entertainment brand.

Just before posting this I remembered Alex Osterwalder's Business Model Canvas: http://en.wikipedia.org/wiki/Business_Model_Canvas. It's more of a tool than a reference but it's a good way to break things down.

answered May 27 '11 at 04:59
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Richardg
474 points
  • Thank you for your answer (+1 btw.) and please notice I have just started a bounty again, so you may wish to extend your answer :) Thanks. – Tadeck 8 years ago
  • Thanks - unfortunately this is about as far as I go in terms of broad business model research :) – Richardg 8 years ago

1

The one I like the best and is quite new is called Startup Genome.

They have done surveys and indepth analysis of what makes startups successful. They have a very interesting report you can download.

They allow you to do a detailed Benchmark of your startup, and it will place you into one of it's four startup types, and give you detailed comparisons of your startup to the others in your category.

The four categories of Startup Personality Types are:

After I took the test, I found I was a Type 1 Automiser.
answered Jun 14 '11 at 03:11
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Lkessler
1,471 points
  • +1 lkessler Thank you very much for such a valuable resource! I believe no one mentioned it yet. Thanks! :) – Tadeck 8 years ago

0

I have not read it but time and again when I ask about this topic, people recommend this book: http://www.businessmodelgeneration.com/

answered Jun 9 '11 at 16:07
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Terry B
121 points
  • Yes, that's the app by Yves Pigneur that I referred to! – Peter K. 8 years ago

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