Products and Money Getting Lost Online

A recent project has directed my focus to Internet startups for the last couple of months. As a part of this,  I have been looking into what business models that may be successful in the current online environment. What this has shown me is that the two major problems facing online businesses are distribution and revenue models.

In the late 90’s, everything suddenly went online. You could buy anything from pet food to virtual currencies online. The Internet was the Next Big Thing. Then things cooled down and many businesses ran out of money.

Google founders

Unfortunately, not everyone can create Google.

The dot-com bubble did however not kill Internet businesses. Today, 91% of Swedes between the ages of 16 and 75 use the Internet. This makes for a huge potential, but still there are no miraculous success stories, as envisioned by the pioneers in the 90’s. Why is that?

First of all, just because everyone can reach you on the Internet doesn’t mean that you can reach them. The promised convenience of online shopping is severely inhibited by poorly designed distribution systems. This is in some ways mitigated through the digitalization of goods (i.e. making CDs into MP3 files).

Digitalization does not come without downsides though. All of a sudden, customers realize that the companies have no (or at least considerably smaller) costs for producing and distributing products. Therefore, they require a cheaper price (read: free). For a case in point, take a look at the struggling news paper industry.

In the end, what has become clear to me is that going into the online world requires a lot of creativity coupled with an understanding of what people are willing to pay for. Important to note is what Ted Valentin pointed out: you have to be able to explain your idea in 5 seconds to the user, otherwise she will have found something more interesting.

Do you have a business model that is independent of ads?


About Marcus

Jag har nyligen börjat nära en besatthet av triathlon. Utöver det älskar jag prylar och att se nya platser. Min blogg kommer att vara en egocentrisk frossa i min träning med inslag av tankar kring utrustning och upplevelser runt omkring.
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2 Responses to Products and Money Getting Lost Online

  1. Pierrefect says:

    Interesting post and an important subject.

    I also believe a problem is the “give it away” craze. Free is naturally not always bad, but as has been brought up during class… if you give something away for free for a while it will be difficult to make people pay for it later on. This is one of the reasons for why newspapers may have problems charging for their content online.

    And, yes. It would be really nice to hear some solid ad independent online business models 🙂 Especially relating to sites that currently risk facing the advertising trap.

  2. Eleni Miliou says:

    Oh, my favourite subject! Right now the ad based revenue model is dominant around the web, but for how long? And what I’m wondering is what the heck will happen to the websites that totally depend on it, when the trend bursts out and users do not really tolerate ‘spam’ anymore? Good idea to document the highlights of our business project on the blog 🙂

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