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What Business Models Make Sense in 2011 and Beyond
What opportunities make sense for a small startup effort?

 12:52 am on Aug 26, 2011 (gmt 0)

I'm stuck and need some insight please. What business models are working online for 2011 and beyond. I'm just not seeing much opportunity to build a real solid business right now, that can still be relevant in 10 years. Can someone please help shift my thinking?

Here's what I see:

1. Content Site - Sure, a little money can be made here and for the true guru, you can do rather well. The big problem here though, is you're 90% dependent on Google for your traffic,and probably even for your ads. That is not a healthy business model to have a single supplier and a single marketing channel, and particularly when they're (gulp!) the same company. So, this can be a nice marketing strategy or a way to other things (reputation building, seed money, etc) but I would not build a business like this, for fear of Google's next update or whatever.

2. Affiliate Marketing - I've seen first hand that affiliate programs are happy to have affiliates as incremental revenue in the short term, to learn their online marketing tactics, then erect more and more barriers to take back more and more market share from them. Meanwhile, the amount of online marketers out there is immense and the cost of advertising is rising daily. Where will the profit margins be in 2 more years, even on Facebook? And that's assuming that leaching off of another business was ever a viable long term business model. Again, this one is good for short term profits and seed money I suppose.

3. SaaS - The toast of Silicon Valley! Build your own hosted software solution that automates a service for someone, a la SEOMoz or RavenTools. Great idea, but it requires a lot more time and money investment than one would think. More importantly, every freaking idea I've come up with (and I've come up with a LOT), I've found at least 5 competitors out there for each, and more often than not, they have angel of VC funding. So how does a single guy compete? There are plenty of success stories on this one in places like Mixergy and Hacker News, but those are the stories of the 1 out of 100 that found a niche and established a defensible position before others caught on. What about the 99 out of 100 who (like most engineers) spent a ton of time and some money building a product, never marketed properly and never got traction? So is that a good model for business then? Not to mention, these are very easy for a larger business to come along and topple; just look at what Google+ is trying to do to Facebook. Now ask yourself what happens if Google comes after you and youre NOT Facebook.

3. Web Production Agency - I seriously contemplated this one thinking it better suites my personal appetite for risk. As I started researching competitors online buy typing things like "magento developers", I was confronted with 3 pages of results that all looked something like this "Magento developers from $18 and up". WTF?!?! Obviously this is outsourced labor and obviously I'm not. Perhaps I could even arbitrage that labor a bit since I know not everyone wants the outsourcing headaches of India, but geeze - the fact that its become THAT prominent is a SERIOUS under current to future profit margins ... isn't it? And besides, I can name two web production firms who've closed down near me in the past year. And I can't think of a single one I've seen hiring recently. Hmmm...

4. Internet Marketing Consulting - Okay, perhaps this one makes more sense? I see more success here. In fact, I saw BlueGlass announced on their blog they're "now accepting clients this month". Okay, perhaps the market is better here, if they've actually been turning people away. And I know marketing is inherently less likely to be outsourced than code ... BUT ... if we're talking about SEO and Facebook and mobile apps etc ... aren't we basically just talking about technical/tactical implementation, separate form strategy which is driven by the client? And if so, perhaps this is equally outsourced and will be in 5 more years? Perhaps the key here is establishing one's self as a high end strategy company - okay, I'll admit THAT seems possible. Be BlueGlass maybe?!?1

5. eCommerce - I attended InternetRetailer this year out of curiosity. But honestly, where's the opportunity in opening your own online store now, if you don't have your own unique product, or some unique sourcing angle? The ability to just source a common product (chairs, TVs, whatever) and sell it for a profit, should be completely extracted from the market by now, right? I'm sure the Amazon's of the world are eating the small guys lunch by now and bidding them out of PPC positions. And if they're not, its a matter of a year or two until they do ... again, unless you have a unique product or can source something unique.

This is an admittedly negative post, but I'm just calling it as I see it, and frankly I feel all the opportunity that I'm seeing that DOES exist, probably will be played out in another 2 years or so, with the quickness things are moving at. The irony is I was a total optimist and had more ideas to pursue than I had time, 5 years ago. But the market I believe has changed immensely since then. I see profound levels of competition, profound amounts of money chasing a relatively few opportunities. It seems every entrepreneur in the whole da** world is starting an online business now. Perhaps then i should be looking to open a restaurant or something instead. lol

So please tell me - is there a business model that makes sense to start investing in *today*? Meaning, you invest now and will have enough time to build and extract sufficient value to justify the effort, before the window is closed?



 1:19 am on Aug 30, 2011 (gmt 0)

Since it sounds like anything is on the table here, consider buying an existing business that is struggling. In this economy, there are a lot of businesses (both on and offline) that have done the hard work it takes to succeed, but cannot continue because the owners have run out of money or otherwise given up. Of course, you'll need to bring some new ideas to revive it.


 1:46 am on Aug 30, 2011 (gmt 0)

I tend to think this won't help, because it's only abstract, but I know it would have helped me at certain turning points to think of things this way...

The confusion you're feeling has its roots in the (arguable) fact that we're at the crux of a momentous shift in economic models from car-based to digital-based. This is like the 1920s and 1930s, when we were shifting from railroad to car, right before a huge boom in innovation and infrastructure. What's needed, what will succeed, then, is innovation and infrastructure. The concept of "business model" presupposes stability. This is not a time of stability; it's a watershed period. Build infrastructure. Think creatively.

Think about what business models are phasing out and what new ones might work. What business models relied on the car to move individual people and goods? Those are going out. What models don't rely on the car? There are a lot of possibilities; the big infrastructure creators - the equipment manufacturers, software creators, online retailers, search giants, social platforms, payment processors, etc. - have only touched the surface of possibility. They're solutions for now, the transition period, but not for the future.

Think of the problems of building the new online economy. Think:

Why isn't everybody online?

What will they be doing online that they used to do offline?

Why isn't everybody talking to each other?

What do people need during this time, and beyond?

What skills will be needed to thrive in the future? They won't be the same as the skills of the past.

Who will be players who weren't before?

What are people afraid of insofar as using online resources?

I know it's abstract, but thinking about these things is the only sure course that I know of to success.


 2:20 am on Aug 30, 2011 (gmt 0)

Lapizuli - those are very interesting thoughts. And yes I think there is some truth in what you're saying. Where I get stuck though is that the obvious ideas have way too much competition at this moment. I tend to think things go in waves - a new set of possibilities open up, everyone jumps on them and then things are saturated for a while, as we await the next opportunity. For example, ecommerce was an obvious opportunity in 1996, but is there much opportunity to sell online now, or are we beginning a consolidate phase there now? SaaS seems in its prime right now but really the best opportunity for someone without funding was probably starting a SaaS business 4 or 5 years ago. Mobile seems like it was the latest big new innovation opportunity but somehow that seems to have become a bit saturated already within a few short years.

I agree with the idea of helping old models convert to new ones. A classic example is how to help the small business get a website online or helping real estate agents drive leads online. But those are done to death already. And so then what?

I feel like I'm waiting for the next wave and it hasn't arrived yet. Or am I sitting on a wave and just not realizing it? :)


 3:14 am on Aug 30, 2011 (gmt 0)

Sitting on a wave and not realizing it, I think...

A classic example is how to help the small business get a website online or helping real estate agents drive leads online. But those are done to death already. And so then what?

That's a great one. It's not done to death, just barely begun, because they're resting on temporary infrastructure. (To steal from philosopher Thomas Kuhn and mix a stew of metaphors, what's been done to death is the "normal science" of building around the rickety settlement. Not the "revolutionary science" that builds the next level of settlement.)

People are desperate for help getting online. The current "help" - well, it sucks.

Go back to when American society was converting to cars from railroad in the late nineteenth to early twentieth centuries. People could sprawl, and they did, as fast as they could, into nexuses that eventually became suburbs. At first they built their own buildings on the spot or with Sears house parts. These were rugged individuals; they had to be to build AND create opportunities for themselves in the new terrain. (Sound familiar, oh webmasters...?)

In later decades, the suburbs needed specialists, not just rugged individualists, and new waves of people moved and congregated who didn't have to know how to build at all - the houses were built for them.

Now back to today. Moms and dads and kids and grandparents and people who've lost old-economy careers or who are just starting their careers are coming online - to work. We're the post-industrial immigrants of today. As people move online, everyone is going to want a website as a base of work and/or socializing. Everyone. Who can create and run websites? Certainly not everyone, no more than everyone in the 40s and 50s could build their own houses, shops and offices and still do their specialty, too.

Non-techies like, well, me need easy, secure, and flexible ways to run our own websites. We're specialized to an insane degree now. We need to be able to specialize in our widgets and not have to build our own widget stores brick by brick.

No CMS, no social platform out there, is easy or flexible enough by a longshot for what will be needed - what's needed right now.

Can you build them? Can you make it easy?

That's one example. There are hundreds more.


 1:06 pm on Aug 30, 2011 (gmt 0)

All of those areas are very much generalists. If I was starting from scratch, I would pick a niche and become the expert in that niche online.


 1:49 pm on Aug 30, 2011 (gmt 0)

Google have staked a claim on the market for business websites with "Get Your Business Online" and its variants internationally..and "civilians" seem perfectly happy with facebook and twitter taking care of putting them "online"..

Might not suit some of those of us here ..but IMO that train has already left the station.

I agree with wheel..being an expert in specific niche(s) is what has worked and what will continue to work.


 2:05 pm on Aug 30, 2011 (gmt 0)

All of those areas are very much generalists. If I was starting from scratch, I would pick a niche and become the expert in that niche online.

Bingo. And not every niche is taken by a LONG shot. My biggest worry at the moment is that I'm only one person (along with half a developer partner) and won't get to all the opportunities I currently see out there for me.

Pick small niches and become the best goddam resource out there. That's what it takes. And then once you do that, you can either broaden that niche, or pick another one and do the same.

If you want to go into web or SEO or consulting of some sort, there are still end users screaming for help in these areas. Just because Google is going to put their businesses online doesn't mean they're going to do it well. There are still tons of local businesses who have no web presence at all (other than their Yelp reviews) There are still tons of small cities and villages who have no web presence at all, or who have nobody to keep them updated, nor anyone to even tell them it's a good idea to include area codes and zip codes on their sites because everyone who comes to look at it doesn't live on Main St. There are still tons of WordPress owners who don't realize if they don't keep their WP and their plugins updated, and their files and databases backed up, they're at risk. There are still tons of businesses who don't realize that there are plenty of other ways to get traffic and buzz besides Google.

By nature, I'm a glass-half-empty kinda gal. But when I look around, I see so many opportunities out there right now it makes my head spin.

Spend a week or two listening and reading. Find some stupid little problem that people would rather throw money at than time, and solve it. Or if you prefer client work, start looking around at all the things that need to be *fixed*. There are a ton of them.

TONS of stuff to do. I haven't been able to take on a new client in years, myself. I only wish I were younger and had more energy, ork ork.


 7:31 pm on Aug 30, 2011 (gmt 0)

Okay - this just kind of illustrates what I'm talking about, IMO. Don't get me wrong, I see opportunity out there insofar as there are big changes afoot. Some are huge all the medical record stuff in health and education moving online, etc. But the other side of that equation is: is there any competition? And everywhere I look, the answer is a resounding YES! I understand, pick a niche ... but every nichey rock I've looked under has come with a sign saying "no vacancy".

As to a few points made above:

> "Google have staked a claim on the market for business websites with "Get Your Business Online"".

Exactly! And its not just them, its Intuit, Yola, Weebly, GoDaddy - you name it. So then I thought to help drive leads for them instead. That seems to be doing okay for the moment but again plenty of competition - Yodle, ReachLocal, OrangeSoda, etc etc. And that's not mentioning the fact that these "agencies" are competing with their own channel providers now that Google and Bing are offering direct programs and starting up local programs, etc.

> "All of those areas are very much generalists. "

Yep. gone there too. And even the niches seem pretty competitive, as compared to the amount of opportunity available within them. For example, let's say I want to help local real estate agents to get online. Much smaller subset. So then I look at people providing IDX websites - and wow there are 20 of them! Okay, then what about people driving leads for realtors? Same list as above unfortuantely but they have their own real estate channels in some cases. Okay, what about productivity tools? After talking to some agents, sounds like they're not really interested in many tools or much process. There are already a few big tooks like TopProducer but few actuallyuse them because (and I quote) "real estate is about the hussle, not managing numbers, and even if they did want the tools, my inbox is flooded every day by vendors that want to come present the latest shiny tool at our office".

Ugh. So you can see where this is going. I've evaluated probably 30 niches at this point, and its the same story over and over again.


 7:37 pm on Aug 30, 2011 (gmt 0)

Stop looking at what's there and look for what's NOT there. Of course there are always competitors, but the trick is to find out what they're not doing, or what they're doing wrong, and drive a truck through it.


 8:28 pm on Aug 30, 2011 (gmt 0)

> "Stop looking at what's there and look for what's NOT there."

And that leads to a market research conundrum I have. On one hand, too much competition and you know there's money to be had but a lot of competition (obviously). But then I find niches where there is no competition and the few sites that exist are really quite poor. First instinct is to assume there must thus be no money in that space, thus why all the sites suck in that space.

There's also the dynamic of finding an open niche but its too open and a small company with no money cannot move the needle. Sometimes it seems small companies are better off if they can find a niche where people are already searching for something, rather than having to sell them on why they need something completely new; it takes real money to sell a whole new category doesn't it? But then if you follow my logic through, you end up in a situation where small companies can only ever be followers and "me too" products. Is that really true? Or do I simply have PPC and keyword analysis blindness? PPC tends to be very much a "pull" media and only works for established products. It seems you need TV ads and infomercials to actually sell a new concept.


 9:34 pm on Aug 30, 2011 (gmt 0)

Regarding process - here are a few thoughts:

Pull v Push - Search is inherently a pull media. You must pull the searchers with your product toward you. The engagement starts with them searching so they're the pictcher and you're the catcher. Push is where you can pitch what you want to. that tends to be more TV and radio ads, though I guess you could push a bit on social but only if you have a signficant following already (perhaps that is key here).

Research: I start with keyword research and its very clear where demand is. If I use a tool like keywordSpy, then its also clear where supply is. And because these things are pretty clear, most of the obvious pull-driven niches I think are already uncovered.

So what does that leave? Push-driven niches. In otherwords, those products where there is some search volume but the competitors are not spending on PPC. Why is that? Well, in those cases you could argue for example a lot of those realtors (mentioned above) may not be looking to improve their process with a CRM tool, but if you showed it to them at a conference or at their office, maybe they'll sign up. So this is kind of creating your own category in a way - you're selling, not simply catching the search demand that 's already there.

So if it were up to me to make a call on this, I'd say 2011 is the year we capitulated from a search-driven opprtunity market, to one where entreprenuers now need to go out and sell their new ideas to the marketplace with push tactics. So then the question is how, and how expensive?

Unfortuantely, its my guess that this is a longer sales-cycle process and things like conferences and a lot of travel are very expensive. It seems to me *these* types of opportunities are mostly reserved for those who raise capital to support the product development and sales cycles.

Perhaps the individual entreprenuer is really limited (realistically) to the following types of businesses thus:

a. consulting (advise client)
b. contracting (build it for $x price for a client)
c. eCommerce for a niche product (good for another 5 yrs at most?)
d. Blogging (build a nice part time income and/or reinforce your consuilting business)?

And perhaps starting that new SaaS type product or anything involving push marketing (aka "sales") is reserved for the funded. And I know there's probably a few examples that fly in the face of what I'm saying ... but if I were to generalize, that's what I observe.



 11:00 pm on Aug 30, 2011 (gmt 0)

But then I find niches where there is no competition and the few sites that exist are really quite poor. First instinct is to assume there must thus be no money in that space, thus why all the sites suck in that space.

Beware of what you term instincts ..until they are honed


You are not seeing the wood for the trees ..and vice versa..

Read again what netmeg said just before..

There are many ways to say it... hers is a good "modern way"....makes a good picture;-) ..

Another way would be "life eats you or you eat life" ( old Chinese origin ) ..in the days when my "digital cousin" frequented this place as a mod we used to occasionally discuss Sun Tzu ..

I commend his thoughts to you ..they will make you smile ..maybe ;-)

Beware of Maya ..


 11:25 pm on Aug 30, 2011 (gmt 0)

There's also the dynamic of finding an open niche but its too open and a small company with no money cannot move the needle.

I believe in a serious business enterprise, you'd already be familiar with the business. The old saw about doing something you know and love, well, what's really important is doing what you know.

If you aren't familiar enough with the niche, probably not the business you should be in. Start with 'what do I know'.

I'm in a hyper-competitive niche. Everyone's in my niche from probably someone in your family to half the affiliates out there. And yet it was a niche I specifically decided to enter. I've had SEO experts suggest my niche as hard, but deceptively so - it's harder than it looks. But when I started, I already knew what the costs where, how to generate business, the cost of generating that business, how much business I could do in a day, and so on. The only thing I had to do was actually do it.


 11:48 pm on Aug 30, 2011 (gmt 0)

Haha - well in my last experience, I tried to eat life and it ended eating me! I entered the dating space in 2006, just before the rest of the world did. I had some decent SEO succcess for a little while but I watched PPC customer acquisition costs triple from the time I began building to the time I was ready to really go into the market. I learned caution (perhaps to much caution) from that experience. It sounds like you have an edge of already knowing your business so that's good. Unfortunately the things I truly know are programming and internet marketing ... just like everyone else in the silicon valley ... the very people who might dare to also follow what they know and build a product. So if I built something for let's say conversion rate optimization ... not only will I be up against 12 other brands and a new one launching every month, I'll also be facing the SaaS startups who all have $500k of startup cash in their pocket. Well, that's the fear anyway. And so then I start walking away from those ideas and start thinking "where can I contribute value that fewer people are looking?". And thus this vicious cycle of trying to find the niche.

> "Beware of what you term instincts ..until they are honed"

Amen! I believe you're probably 100% correct. I can see many things in the data but I just cannot see viable niches, and I know my own contradicting thoughts are part of the problem. Any recommendations then as to how I can locate them? If I start with this data, what should I be looking for to find or at least validate a niche?


 2:54 am on Aug 31, 2011 (gmt 0)

Spend a week or two listening and reading. Find some stupid little problem that people would rather throw money at than time, and solve it. Or if you prefer client work, start looking around at all the things that need to be *fixed*. There are a ton of them.

But if you seriously can't think of anything, then maybe it's time to look offline.

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