Since the dotcom boom and bust the debate has raged as to what business model is appropriate for the Internet. We hear of amazing valuations on companies like YouTube, Twitter and Facebook with no discernible business model to justify their valuation. We hear of commerce sites like amazon.com that generate a lot of revenue (and finally profits). However, what’s the right business model for the Internet?
The May 11 issue of Forbes had an interesting and short article on the VC-backed business dilemma. The article talks about a company who two years ago could not raise money for a commerce site because the VC community was enamored with a media/advertising model. Today, that model is no longer in vogue and he is being approached by VC investors who have now decided that commerce is the right model.
Which is the right model? The answer seems obvious: yes. The Internet can be a new media play and it can be a commerce play. The key is to develop a business model that attracts a group of users/customers that can support your business model. Doesn’t seem that hard to understand … at least to me. But then I never have been a fad investor. Wish I had been sometimes, would have made a lot of money … but probably would have lost it too.