It’s hard to deny that it’s an exciting time to be doing business. Where there was previously the business world and the internet business world, I would argue that today there is no distinction. The internet is inextricably part of our day to day business lives. And if it is not, then watch out! Tomorrow someone is going to cannibalise that market too.
As I write, the latest market to face the deconstructive cannibalisation that has changed the way we do business is the estate agency market. If that is your market and you are unaware of the arrival of Stelios in your space, watch out! - £25million of investment is not insignificant in a market that has traditionally seen businesses set-up for the cost of a shop front and a copier – see Telegraph article from 8th December.
Undeniably everything happens at a pace that we could once not even imagine. There is an opportunity for small, previously-unknown companies to grow and change the world in a way that politicians, banks, and big conglomerates can only dream of. But that’s not to say that all companies are created equal. If you look at most of the success stories that have come out of Silicon Valley and other regional business hubs in the past decade and a half, there are essentially four models upon which to build a business on the internet.
First, there are companies that essentially serve as an e-commerce or web marketplace. They take a service, or set of things that used to be sold across a variety of places, and provide a more streamlined web platform that offers the same thing. This is where we have success stories like Amazon, eBay, Uber, and Airbnb; they are not creating unique products, but rather, they are providing an intelligent and convenient way for consumers to access existing products and services—and making money by taking a cut of each sale.
Next, are companies that have some sort of tech product, that make their profit in a more traditional way: providing a tangible product—or in tech parlance, ‘hardware’—and selling it for a profit. This is where companies like Nest, Beats, and Fitbit come in. Perhaps the most successful hardware company of all time is Apple, whose products drive sales and hype in a way that its competitors simply have been unable to match. Witness the fact that Apple goes from strength to strength and its 80s and 90s arch-rival in personal computing, IBM, sold off its PC business to Lenovo a few years ago as it became unable to compete.
Subscription or 'Freemium' models
Third is the subscription model—which includes the sub-category ‘Freemium’ model— the software or ‘service’ providers - which are championed by players like Spotify, Skype, Salesforce, Dropbox, HubSpot, and Netflix. Here, users pay a monthly subscription or, in the case of Freemium, use some of the service for free up until a trigger point and are then asked to pay for the rest. This fairly straightforward way of doing things means that the more subscribers a company, the better it does.
Web Advertising & The Eyeball Economy
Fourth, the remaining fundamental way to make money on the internet is perhaps the category with the largest number of companies attempting it, but it’s also the most fickle: web advertising. Companies offer a free service such as a search engine, a social network, or a means of communication hoping to amass as many eyeballs, or users, as possible. This is how Google, Facebook, and Twitter and the like make their money: selling ads against the masses of data and content—think Facebook posts or Google searches—that their users generate. Two of tech’s “Big Four” (Facebook, Google, Amazon, and eBay) fall into this category. And of course, many smaller companies and apps pursue amassing ‘usership’ as their sole goal, with the hope of getting acquired by a bigger company when they get the usership high enough to warrant it.
This last model of new world business has spawned an entire economy that didn’t exist before: 'The Eyeball Economy’. It’s not only acceptable, but entirely common these days to launch a startup in Silicon Valley without any revenue generating aspect whatsoever. Even more than dollar signs, many start-up founders are solely hoping for eyeballs. Enough eyeballs, or so the conventional wisdom goes, and it’s only a matter of time before you get bought out in a ten figure IPO, without ever actually reaching a day where your company generates a single pound of a profit the old-fashioned way.
So, that’s all very exciting, isn’t it? But not so fast.
For you, dear reader, as a start-up or an SME business owner who's looking to increase sales and boost profits, this kind of scale of success might as well be a fairy tale. While there are very few exceptions, the volume of users and scale of mass adoption that has to happen before a company can find financial success in this way is simply too large for most business operators in this space. Everyone wants to be the next Google or Facebook, but if you are going to secure further investment that’s simply not a feasible goal to have from the outset.
While the business pressures on start-ups or recently established B2B or B2C businesses are certainly massively different to the leaders in these four segments, they did all start somewhere. Understanding where you fit into the landscape is key in building your business. The first three categories mentioned above—hardware model, subscription model, e-commerce—can all be applied to the B2B sphere, but the fourth “eyeball” route can not.
However, just because this eyeball economy can’t be used by an SME as a viable business model, understanding its implications in the new digital economy is still absolutely relevant to building your marketing plans and therefore your future success.
Make sure you understand where you fit in the landscape and how you are going to hit your goals – financial, revenue, profit and/or eyeballs!
Tip #1: Have a feasible goal. You may exist in the era of the eyeball economy, but as an SME owner, you aren’t very likely to be able to cash in on eyeballs alone.
If you missed our first blog, 'Introducing All that PR & Marketing Bollox Explained', click here.
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