Vijay Anand | The Startup Guy.

Internet Business Models: In need of differentiated Metrics?

Posted on: August 22, 2007

“It is better not to complicate or try to innovate in business models”, says Guy Kawasaki in his book and speech titled ‘The Art of the Start’. He cites an example where it costs 1$ to make the product, you sell it for 5$ and you make a margin of 80%. It’s simple economics and is quite effective, he says.

Well, I would agree.

When you walk into a retail store and buy a bag of sugar for 10$, you do know exactly what you got for it. You can touch, feel and hold onto your tangible asset that you’ve just bartered that $10 for. It makes perfect sense and the whole universe is in perfect harmony.

Imagine that I am an advertiser and I pay $10 to put up advertisements in your site. You pay about $1 for each view and click, and ten impressions later, you get your $10. Question: What did the advertiser get?

Most internet businesses do seem to be based on such similar return on investments. You pay for something, but what you receive instead is the potential for a lead to business, which might arrive at your door step ten months from now, or ten minutes since the moment of the impression. The results are hard to predict and there is certainly uncertainly in the air.

Contrast the second scenario with a man holding a bag of sugar in his hand, and you see a stark contrast.

There is also something very elementally different about internet and web services. Most of them do not sell products. They do not even sell services. What they do sell share is information which is accessible, relevant and is well laid out so that the experience of information access is pleasant. Is Channeling information and a “sale” the same thing?

This thought occured to me today and I am wondering if any of these basic differences will affect the way businesses are modelled for the web world. I have a strong feeling that they would have to be.

1 Response to "Internet Business Models: In need of differentiated Metrics?"

This concept of touching and feeling is very much applicable to the Indian consumer scenario. In the West, if you notice, people are comfortable buying all things online, which we here in India would never even dream of buying on phone also !!
But you have touched on a very good thought, something which forms the basis of my startup 🙂 (coincidently !)

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