Week 1: The Business Model Approach to Web Site Design
Welcome to the Personal Web Business column! Just what is a personal Web business? (Note: Not a Web site—a Web business!) Why should you start one? What is the autonomous business model and why is it a good basis for your personal Web business? My first article on personal Web businesses answers these questions. Your assignment before my next article is to come up with ideas for your own personal Web business. But first, the "Hacker Phrase of the Week," a collection of witty comebacks to coworker comments.
Hacker Phrase of the Week
"Sure… you're bitter."
Usage: Any time someone complains too much.
Damn it, I've been up all night hacking this algorithm and I still can't get it to work.
Sure… you're bitter.
Everyone should own his or her own Web business. There's just no excuse for not having one. The technical and business skills needed to start a Web business are easily acquirable if you set aside the time, and the startup costs are minimal. Moreover, with everyone who's anyone online, you have access to a virtually unlimited number of markets. What this means is that, armed with a good product or service and the proper business model, you should have no problems developing your very own profitable Web business. More importantly, by starting and running your own Web business you'll learn a lot about business in general.
Most of us have very strong technical skills, but we lack the business skills necessary to optimally exploit our technical expertise. By starting your own Web business and working to keep it profitable, you will naturally acquire many key business skills, without having to attend a high-priced business school. There's an old saying: Experience is the best teacher. If that's true, by starting your own personal Web business you'll gain plenty of experience playing the roles of engineer, marketer, manager, accountant, financial officer, president, and CEO, just to name a few. You can then build on these experiences to start a more complex Web business, or even an offline business. But the bottom line is that it's just plain fun. You're in charge of the whole show and you get to reap all the benefits of your hard work!
For the past seven years I've been teaching undergraduate and graduate business students (MBAs) how to create what I call personal Web businesses. These are Web sites that actually make money (which the students get to keep), and their grades are a function of how profitable their Web businesses are. Thus, my students are highly motivated to create good Web businesses. While there are an infinite number of possible Web businesses one could start, the students who have been the most successful at making money are the ones whose Web businesses are based on what I refer to as the autonomous business model. In fact, the actual definition of a personal Web business is this: a money-making Web site that operates under the autonomous business model. In this and future columns I'll teach you some of the key concepts and techniques I've discovered over the years about how to start and run a successful personal Web business. My hope is that, by the end of my series, you'll have your own personal Web business ready to go. But one step at a time. The first concept you need to understand is the autonomous business model.
The Autonomous Web Business
I teach my students that starting up a good Web business is in some respects very similar to developing robust software: Both depend on a good design. For a business, this design is more commonly known as a business model. To use an analogy:
robust software : good design :: successful business : good business model
So, just as robust software always starts with a good design, a successful business starts with a good business model. I'm going to save you a lot of grief by giving you a business model that works well for personal businesses: the autonomous business model.
To understand why you should base your personal Web business on the autonomous business model, let's first examine a business model that doesn't work well. I call this business model "cash for content."
Cash for Content: An Inappropriate Business Model for Personal Web Businesses
Figure 1, a business activity map, depicts a typical Web site. In this example, the content provider (P) adds content (step 1) to his or her Web site (W), and the Web site's customers or community of users (C) view this content (step 2).
A typical Web site model.
As is, this is a model for a Web site, not a Web business, since the site owner doesn't make any money in this model.
When they think of turning a Web site into a Web business, most people think of a business model in which users pay (step 2)—usually with a credit card—for the privilege of accessing content (step 3). P's bank account (B) gets credit for the purchase (step 4), and at some later date P actually gets money from his or her bank (step 5). The business activity map for this "cash for content" model is shown in Figure 2.
The "cash for content" business model.
There are several problems with basing your personal Web business on this business model. First, you have to provide content that is valuable enough that customers are willing to pay for it. Most of us don't have this kind of valuable content; to get it we have to pay for it—and I'm assuming that, like me, you don't want to waste your hard-earned money paying for content to put on your Web site. Second, it almost goes without saying that your content has to be unique. If your customers can get the same content for free on some other Web site, they probably won't pay you for it.
But even if you did have access to valuable and unique content, the biggest problem with the cash for content model is that it's high maintenance. You have to constantly update the content on your site to keep it running successfully. Another assumption I make is that the typical person who wants to start a personal Web business is busy during the day with a "real job,"™ and the last thing anyone wants to do after coming home from a hard day of work is to update content on a daily or even weekly basis. Before you cry, "Not me, I'm dedicated," I should point out that I've lost count of the number of students who swear they'll update their site's content but who—for various reasons that always have to do with being busy with something else that's more important at the time—always end up just letting their Web sites sit.
What you need is a business model for a personal Web business that fits your busy lifestyle—a business model with these characteristics:
You can provide your user community with valuable content that you don't have to pay for.
You don't have to work at maintaining the content that you provide.
You make money from this content.
With an offline, brick-and-mortar business, such a model is impossible, since you're asking for money for basically doing nothing. However, when you're talking about an online Web business, such a business model is possible, and the autonomous business model is one such model.
The Autonomous Business: A Good Business Model for a Personal Web Business
The basic idea behind the autonomous business model is shown in Figure 3. You (P) develop the Web business and your community (C) adds the valuable content for you, for "free." You do add some initial content, but it's just the minimum needed to get people interested in your site (bootstrap content) so that they then start contributing their own content. With this model, you don't have to pay money for the content and you don't have to spend a lot of time updating or maintaining your site. Your community does all the work for you!
The autonomous business model: content component.
To turn this into a business model, you need some way of making money. This is where advertisers (A) come in (see Figure 4). Just like with television commercials, there are many Web-based advertisers who will pay you to place ads on your Web site's pages, in exchange for your users (C) clicking the advertisers' banners, purchasing items, or providing information about themselves (leads).
The autonomous business model: revenue component.
This is the essence of the autonomous business model. And it does work. To see examples of profitable personal Web businesses based on the autonomous business model, check out my sites: Dating Expert.com and YesNoMaybe.com. Once again, the beauty of this model is that you do very little except for the initial design and implementation of the Web site and adding just enough (bootstrap) content to make it interesting to whatever market you're targeting. Your community of users does the rest. They even do the bulk of your marketing for "free," as you'll see when we get to my article on memetic marketing. In my experience, for busy people like you and me, this is the best business model on which to base your personal Web business. The final question you need to answer is this: "Exactly what type of Web business should I start?"