Business Models and Business Reality

1. Business Models and Business Reality

2. Alsop on Content • Content is queen, not king. • “Technology is king. The one thing that VC depend on for evaluating new companies is intellectual property…. • “Virtual magazines, or content businesses on the the Internet, use technology as a platform. If they close in on something proprietary, they come nearer to justifying a vc’s investment of risk capital.” • Stewart Alsop, “An Old Fogy Doesn’t Get Web Content”, Fortune, Nov. 6, 2000.

3. Definition: Business Model • “to win a sustainable advantage in attracting, developing and holding customers”

4. Business Model Distinguish from: • Revenue model • Funding model • Organizational model

5. Indirect Revenue Models • Advertising • Niche vs General • Business vs. Consumer • Local vs. National • E-commerce • Take percentage of sales for delivering qualified customers. • Support • Provide more cost-effective means of delivering traditional business service.

6. Direct Models • Direct Pay/Service • Subscription • Per piece • E-commerce • User buys directly from you.

7. Non-commercial Models • Public Radio/TV • Will communities support online publications or services that serve them? • Will government funding or community funding support services that cannot or should not be commercialized? • Non-profit organizations • Grants

8. Funding Models • Self-funded • Use cash from business to fund growth. • Advantages: retain control; gradual, adaptive growth. • Disadvantages: under-capitalized means fewer resources; might miss window of opportunity. • Sell all or part of company and give up equity. • Company’s future depends on successful IPO or acquisition (exit strategy). • Advantage: more resources, rapid growth, upside. • Disadvantages: loss of control; grow too fast; short-term.

9. What Do You Want? • Build a Lasting Business • Get Rich and Get Out • See Your Idea Realized • (e) All of the Above

10. Organizational Model • What size and structure is appropriate for the idea? • Startups vs. traditional businesses. • Focus & Commitment • Expertise • Resources • Environment

11. How Big? • Your business model integrates the revenue model, the funding model and the organization model. • For example, to be the dominant player in an industry, you have to be growing at least as fast as the industry itself.

12. Internet Public Library The Quest for a Sustainable Model Internet Public Library: http://www.ipl.org/ Analysis: The Internet Public Library by Lorrie LeJeune in Journal of Electronic Publishing IPL Mission Statement

13. IPL Timeline: Start January 5, 1995 • Project started at University of Michigan School of Information and Library Studies as part of a graduate seminar. • Started by Joseph Janes, Associate Professor and 35 students in his class.

14. IPL Launch: March 1995 • IPL Site opened (about 70 days from project start to launch) • University provides server (Sparc 20) and an Internet connection • Good traffic and publicity.

15. IPL Summer 1995 • Receives $150K Grant: "We are pleased now to be supported by grants from the School of Information via its grant from the W. K. Kellogg Foundation, and the gifts of the Friends of the Library" • Friends Sponsorship program • Individual -- $25-$100 to fund a review or a page. • Corporate -- Sponsor development of an area

16. IPL: 1996 • In January, determines that School of Information will not continue to support it. Develops business plan to pursue additional funding. Establishes position to do outreach. • In June, IPL awarded $200K from Andrew W. Mellon Foundation -- Press Release. This grant will "Fund the development of several projects aimed at ensuring the long-term viability of the Library by giving it a steady and sustainable revenue stream." • Launchses "WebINK: Internet Newsletter for Kids“ and POTUS – U.S. Presidents

17. IPL: 1997 Summer, 1997 • Funds are beginning to run out. Staff members leave, anticipating that the project will be scaled back. August 1997 • Supplemental funding supports 2 administrative staff with funding through April 1998.

18. 1998: Third Anniversary • IPL has served more than 5-7 million people in 2-3 years with a staff of six and a budget of less than $450,000. • "Where we are now is extraordinary, for a class project with no money, not even a server when we started," said IPL Director Joseph Janes.

19. Joe Janes: • “People think the public library is free, because they don't have to hand over any money whenever they use its services. But it didn't used to be that way; public libraries were actually subscription libraries. People paid a set fee for each service and that went on for several hundred years. In the late 1800s Andrew Carnegie stepped in, donated a lot of money for buildings, and got the government to support these new public libraries with tax revenues. And this system has been in place -- virtually unchanged -- since the 1920s. So now what happens is you have all these librarians saying that everything is free.”

20. Views of IPL • Lejeune: The IPL made a tactical error in embracing the public-library model. • Schelle Simcox, hired to do business development left in July 1997: "If you want to be an information provider you need to have someone on your team with the ability to bring in a steady source of income. That person should be a marketer who can sell your ideas to an audience that isn't quite ready for them; someone with the ability to pull people together, get them excited about ideas that are unproven, and convince them to offer financial support."

21. GNN: 1993-1995 First Commercial Web Publishing Venture First Portal First Site to Sell Advertising

22. Developing GNN • In Feb. 1993, formed four-person "skunkworks" team and began planning for new product based on the demo. • Internally, we had to advocate for the project and establish a separate identity and eventually a separate team and budget for development.

23. GNN: 1993

24. GNN: Launch of a Portal • Launched at InterOp in August. • Announced that it would be supported by advertising. • Consisted of a directory of links: The Whole Internet Catalog. • Plus special-interest magazine-like sections. • Difficult to sell advertising.

25. Internet in a Box • Product developed by Spry and co-produced with O’Reilly • Included Web browser that pointed to GNN. • Announced at first Internet World, December 1993.

26. GNN: 1994 • Obtain a license to publish NCSA's What's New page, the most heavily trafficked site on the Net. • We establish a publishing process for maintaining the resource. • Advertisers begin knocking on our door.

27. GNN Staffing: 1994 Team of Twelve • Project Manager • Sales and Marketing • Graphic Designer • Editorial and Production • Technical Director

28. GNN: 1995 • GNN is perceived to be a "native" Internet brand. • In spring, AOL offers to buy GNN. We believe it's necessary to scale up GNN. Staff is up to 23. • Sale for $14 million in stock occurs in summer. • First sale of an Internet intellectual property.

29. AOL and GNN • AOL repositions GNN as an Internet service provider. • Ignores content and directory services. December 1996 • AOL closes down GNN.

30. Three GNN Designs Click here

31. Web Review 1995 to Present • Launched in August as general Web magazine. • Sample article. • Additional cover.

32. Web Review • We were stretching the magazine metaphor as far as we could go. In our first half-year, we had the resources to build fairly complex story layouts. • Covers • Digital Academy, October 13, 1995 • Mozilla, Dec. 8, 1995 • Webula, October 27, 1995 • Web95, December 22, 1995

33. Web Review Business • Advertising model • Was to have been linked up to AOL and GNN and they were to sell advertising. • We had difficulty as a general magazine and began to target Web developers. • After about a year, we announced a decision to close the magazine.

34. New Partnership • Struck a deal with Miller Freeman, a SF-based, diversified publisher to jointly produce Web Review. • We’d produce the editorial product and they’d handle the sales and marketing. • WR complemented a Web conference and a Web magazine.

35. Web Review Re-launched • Resume publishing in Fall of 1996 focusing on Web designers and developers. • New target audience plus maturity of Web products and advertising make the publication reasonably successful.

36. Web Review 1999 • About 450,000 pages views a week. • About $100K/month advertising. • About 25k email “subscribers.”

37. MFI Acquires Web Review • MFI (now CMP) buys Web Review for $3 million.

38. Ferndale • Ferndale • An Interactive entertainment produced by Tom Arriola • Sample

39. Likeminds • Collaborative filtering applied to movies • Patented technology applied first on kiosks in video stores. • Songline prototyped Web demo • Spun out Likeminds in 1997 • Acquired by Andromedia; • Andromedia acquired by Macromedia.