Business Models

and Business Reality

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.
Definition: Business Model
 “to win a sustainable advantage in
attracting, developing and holding
customers”
Business Model
Distinguish from:
 Revenue model

 Funding model

 Organizational model
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.
Direct Models
 Direct Pay/Service
 Subscription
 Per piece
 E-commerce
 User buys directly from you.
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
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.
What Do You Want?
 Build a Lasting Business
 Get Rich and Get Out
 See Your Idea Realized
 (e) All of the Above
Organizational Model
 What size and structure is appropriate
for the idea?
 Startups vs. traditional businesses.
 Focus & Commitment
 Expertise
 Resources
 Environment
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.
Internet Public Library
The Quest for a
Sustainable Model
Internet Public Library:
http://www.ipl.org/
Analysis:
The Internet Public Libr
ary
by Lorrie LeJeune in
Journal of Electronic
Publishing
IPL Mission Statement
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.

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.
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
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
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.
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.
 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.”
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."
GNN: 1993-1995

First Commercial Web Publishing

Venture
First Portal
First Site to Sell Advertising
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.
GNN: 1993
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.
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.
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.
GNN Staffing: 1994
Team of Twelve
 Project Manager

 Sales and Marketing

 Graphic Designer

 Editorial and Production

 Technical Director
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.
AOL and GNN
 AOL repositions GNN as an Internet
service provider.
 Ignores content and directory services.
December 1996
 AOL closes down GNN.
Three GNN Designs

Click here
Web Review
1995 to Present
 Launched in August

as general Web
magazine.
 Sample article.

 Additional cover.
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
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.
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.
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.
Web Review 1999
 About 450,000 pages views a week.
 About $100K/month advertising.
 About 25k email “subscribers.”
MFI Acquires Web Review
 MFI (now CMP) buys Web Review for
$3 million.
Ferndale
 Ferndale
 An Interactive entertainment produced
by Tom Arriola
 Sample
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.