I was reading a post here on the Silicon Beach Group. Elias Bizannes from Pricewaterhouse Coopers had an interesting framework for looking at consumer internet companies. I think its a good categorizer (is that a word) but I recall in the early days I did a slide that tried to distill how we could make Booking Angel successful. Its probably over simplified but I like simple explanations of the world.
Firstly the Internet is all about engagement and transactions. How many eyeballs do you need to attract who will transact with you and how much will you earn. If you are a blog running adwords your transaction is someone clicking on an ad and as such you need to attract alot of eyeballs to make it successful. If you are social network like facebook who have struggled in the past to convince people visiting there to click on an ad, you therefore have to attract a lot more people or work out some way to convince them to click.
Not everything is ad supported there are subscriptions and product sales but it doesn’t really matter the success of a startup is roughly described by the graph below. If you wanted to put it in a formula the survival metric for internet companies in the next year is
Eyeballs x Conversion x $ Transaction > Expenses
In thinking about the companies that are making the real money on the Internet they have enabled other people to make money and have shared in their success. They are the business models and enablers of the Internet. Why is this cool? Its obvious you have other people working on attracting eyeballs for you. Google has been most successful because they have done it without needing the consumer to actually transact ie pull out a credit card and hand over money, all they have to do is click. There is also some argument that Google ads provide some user benefit because theier text ads are in context and relevant.
Imagine if someone came up with a widget that was distributed in a similar way to adwords that actually provided some real user benefit right at the most appropriate time. Imagine visiting your favourite review site, reading a review on a few businesses and then this widget is right there allowing you to make an online reservation, imagine if you were the owner of this website and this useful widget earned you $$ every time a user did it. Now go one step further and imagine you owned the business that was being read about on that website and you only paid for confirmed appointments or reservations made through this widget…. Isn’t that a perfect simple beautiful world. We think so.
Tags: Booking Angel, Startups, Strategy
