Gideon Greenspan - Startup Tips
Where is the Real Money Online?
If you look at web startups building real businesses, and not just praying for an "exit", three models appear time after time:
- Vertical-specific aggregation. Collect information from multiple sources relating to a topic, then re-present it to users in a more useful way. This will attract highly targeted traffic, to which you can advertise and sell products or services. In some cases, you can sell the content itself. You'll probably need to build a data mining and content analysis system which is tailored for your needs. In some cases you can leverage a community of people which is willing to help. Some examples: Farecast (flights), Fixya (tech support), Mint (personal finance), Octopart (parts), RetailMeNot (coupons), Retrevo (electronics), Seeking Alpha (markets), Trulia (real estate).
- Tools for website owners. Create something that makes life easier for site owners, or helps them earn money. You can then upsell a subscription-based premium version, or take a cut of money changing hands. These products are automatically viral, since sites which use your tool advertise it to their visitors. Some examples: Conduit (toolbars), JotSpot (wikis), Ning (social networks), OpenX (ad serving), WuFoo (forms).
- Peer-to-peer e-commerce. Create a platform and marketplace for direct buying and selling of a certain type of good. Take a percentage of transactions and/or charge for advertising or premium listings. Once you've tapped in to a community, word will spread fast. A key challenge is building trust via appropriate reputation mechanisms. Some examples: Associated Content (content), Betfair (bets), Etsy (handmade), Prosper (loans), StubHub (tickets),
Naturally there are many amazing companies, like SmugMug and LinkedIn, which don't fit in to these groups. But I wouldn't go building yet another social network, and hoping that the people and profits will come. Even the mighty Facebook took years to reach profitability.
Combining 2 or 3 of these categories can make for an amazing business. For example, Google aims to aggregate "all the world's information", the largest vertical of them all. Google also offers dozens of tools for website owners. One such tool is Adsense, which facilitates peer-to-peer commerce in traffic between sites.
© Gideon Greenspan 2023