Business Models for the Web - Find Your Best Fit

October 16th 2009reshma@seedcamp.com

twitter: @seedcamp

Business Models for Startups

Think through a biz model early on; Don’t just build and worry about survival

You don’t need to deploy it at the beginning but it’s a helpful exercise to figure out how you’ll make moneyAlso helps you figure out what about your product would be valuable for a user and potentially avoid build mistakes

Lots of ways to sell valuable services. Find your ‘Best Fit’

The devil is in the details and secret to success in the execution – talk to other startups and learn from each other

Seedcamp companiesOf the 11 (13) startups; Mobclix (mobile ad-network), Kublax (freemium?),

Basekit, Zemanta, Soup, Ubervu (Freemium), RMO (Subscription), myBuilder (marketplace), Kyko (Virtual goods), Toksta, Stupeflix (License)

Business Models for Startups

A flavor of the popular and successful few:

AdvertisingFreemium and SubscriptionMarketplaces and eCommerceLicense and SaaSVirtual GoodsGraduated Business Models

Advertising

Everyone

There’s a lot of noise. Isn’t so dissimilar to the physical world

Don’t rely solely on advertising

You have to pedal twice as fast to go the same distance

data thanks to

Advertising as a supporting Revenue stream; Blend with complementary modelsLook at verticals, lead generation, affiliate programs (eBay, Amazon), Mobclix (ad network + analytics subscription)

Expedia (Marketplace), Business Week and NYT (Offline one-off and subscriptions)

Startup examples – Zoombu (lead gen), Simply Hired (job seekers), Zemanta (Amazon affiliate)

Freemium

Skype, Flickr, 37Signals, iMall, Freetailer, Freeservers

Basekit, Box.net, Zemanta Pro, Kwaga

Model: Offer basic services for free (features, use), drive users, and charge a premium for truly advanced features

Subscription

Model: Straight charge for use of service. Can have promotional offers

Salesforce, Amazon EC2, Gartner

Slicehost, Erply (actually, fewer startups starting with a straight subscription model)

Marketplace &eCommerce

Build a great marketplace and they will pay

Or make and sell something people want

Marketplace and eCommerce

Model:Mktplace - % of success fee, listing fee, subscriptioneCommerce - Acting as the merchant itself or agency

There is a LOT of CONSISTENT Revenue to be made here

Expedia (Merchant model),Net-a-porter, Zappos

myBuilder, Rent Mine Online

Licensing and SaaS

Model: License underlying technology or offering software as a service to customers

SMEs – Distribution (Channel, channel, channel)Corporates – longer sales cycles, customization

Big company: Livebookings, Meebo, Magnify.net, NetSuite

Startups: Toksta, Stupeflix, Codility

Virtual Goods

Model: Selling virtual gifts, furniture, in-game upgrades like weapons, online currency, etc

Changeyou, Tencent, Second Life, Habbo Hotel

Stardoll, Kyko, HotorNot, Platogo

Graduated Business Models

Blended business models that add further relevant revenue streams

myBuilder – going from % of transaction to subscription to advertising/lead-genAmazon – E-commerce to hosting to affiliate advertisingOther models: Micropayments, Third party support models

Consulting = NOT a business model b/c it’s not your core activity

Good Blogs/Resources

http://biztools.pbworks.com

http://startup-marketing.com/the-right-business-model-for-your-startup/

http://omalleyblog.typepad.com/infectious/2009/02/ad-based-startups-bad-idea.html

http://500hats.typepad.com/500blogs/2008/09/startup-metrics.html

http://www.avc.com/a_vc/2006/03/my_favorite_bus.html

http://www.techcrunch.com/2007/06/20/virtual-goods-the-next-big-business-model/