Internet World Spring 1998 Presentation on Emerging Business Models

Emerging Web Business Models
by Eric Goldman, Esq.
Cooley Godward LLP

1.                  Introduction.

  • Overview
  • An Analysis of Different Business Models
  • Things You Can Do Tomorrow

2.                  Overview.

  • Welcome to the Attention Economy—expect to pay for attention
  • A corollary—the pitfalls of Diagonal Competition
  • The only constant is change

3.                  Internet Access.

  • Internet access is a commodity
  • Internet access providers are like utilities (fixed investments with limited capacity)
  • Internet access faces extreme price pressure (but note attempts to move the market by AOL)
  • Internet access is particularly susceptible to diagonal competition
    • one benefit of being an Internet Access Provider—guaranteed attention
    • Examples of diagonal competitors: Juno and AT&T

4.                  Web Design and Hosting.

  • Services business; little leverage opportunity
  • Low barriers to entry
  • Extreme price competition

5.                  Advertising and Sponsorships.

  • Pricing options: per impression, per click through, per “result”
  • Page location options: banner, interstitial, positioning/mall, integration into content
  • Delivery options: Run of site v. keywords v. demographically targeted
  • The complexities of tracking results
    • By cookie
    • By referring URL
    • By establishing a dedicated page
  • When sharing revenues, consider the definition of Net Revenues and banner/house ads
  • Can a business survive on banner ads alone?

6.                  Content Metering.

  • Different ways to meter content
    • Subscriptions
    • One Time Fees
    • Per Use Fee
  • Technological controls—pre- and post-infringement devices
  • Is IP fungible? Software v. content
  • Highly susceptible to diagonal competition:
    • Software functionality can become integrated
    • Content may be a commodity: the classic come-on for attention

7.                  Service Outsourcing.

  • The web particularly lends itself to outsourcing
  • Examples: ad serving; electronic commerce; email/Usenet provisioning; certificate authority
  • High transaction costs (requires due diligence)
  • Buyer loses significant leverage post-signing
  • Sellers can learn a lot about buyer’s business
  • Buyers must plan for post-contract transition

8.                  Merchandising/Internet order.

  • The danger of channel conflict
  • Watch out for exclusive territories!!
  • Building traffic through “traffic”/ “linking” deals

9.                  Auctions.

  • Can create more efficient markets
  • Potential for big returns by taking a cut of every deal
  • The dangers of users taking transactions off-site

10.              Sale of Personal Data.

  • Personal Data can support multiple models:
    • Targeted email
    • Targeted advertising
    • More sophisticated understanding of customers
  • Must control the data (valuable trade secret)
  • The dark clouds of regulation threaten

11.              Branding/Decision Reinforcement.

  • Brochureware and advertorial content
  • Building a community of interests
  • Not all physical space businesses warrant elaborate web promotion

12.              Things You Can Do Tomorrow.

  • Build a community
    • Offer user-to-user communication
    • Allow virtual governance
  • Turn your customers/suppliers into salespeople
  • Offer contests/sweepstakes
  • Identify and segment your users
    • Induce users to disclose personally identifiable information
    • Offer loyalty programs

About the speaker: Eric Goldman (formerly Eric Schlachter) is an attorney practicing cyberspace law with the Silicon Valley firm of Cooley Godward LLP. He is an adjunct professor of Cyberspace Law at the Santa Clara Univ. School of Law. His web page is located at http://eric_goldman.tripod.com/.