Feature

No such thing as a bad e-business idea?

Everyone loves backing a winner. E-Business Review asked four specialists to make their predictions for winners and losers in the new economy

Head of business consulting for e-business agency, Nvision

Roland Hanbury

Winner: Business-to-business exchanges

My hot tip for 2000. These either match buyers and sellers for surplus stock in fragmented markets, or consolidate information flows through supply chains. They represent a much sounder business model than most consumer sites for three reasons: 1) The revenue stream is from commission on real value-added transactions rather than based on selling advertising to a fickle audience in market glutted with advertising space. 2) Building a business-to-business brand is much less expensive than a business-to-consumer brand. In America they are now talking about needing a minimum of $100m to build a new consumer brand. 3) What they do can only be done effectively on the Internet. One example is eMerge Interactive, which is currently coining it in the US by "connecting producers, feedlots and packers involved in the sale of cattle" and taking a percentage of every sale.

Winner: Online recruitment agencies

There are already numerous job advertising sites, but we are starting to see online services that offer candidate matching based on skills matrices, online testing, online interviews, online timesheets etc. This is taking off in Europe faster than in the US, and will have a huge impact on the fragmented and inefficient recruitment industry.

Loser: Consumer portals

These would be hard to attempt now. This is a very crowded market, with information sites already catering for almost every imaginable interest. Not only would it be hard to establish a high user base, but even harder to derive any real income - the advertising market is saturated, and e-commerce opportunities are rapidly being soaked up.

Loser: General auction sites

Like job advertising sites, these succeed or fail by virtue of scale - are there enough items in any given category to provide price benchmarks and a liquid market? In the long term there is room for only a small number of big players, and there are already plenty of contenders, so anyone looking at this is already too late.

CEO, ClickMango.com, start-up.

Robert Norton

Winner: Shared buying

The Internet is an amazingly powerful tool for community building and companies like Ebay and QXL are good examples of this. I like Letsbuyit's model which takes community power one stage further, enabling individuals to group together to achieve greater discounts on products. This concept of shared buying provides consumers with greater purchasing power and makes it harder for retailers to stick to their ideal margins.

Winner: New market makers

Everyone is talking about business-to-business these days, arguing that the bulk of electronic commerce transactions in the future will take place directly between businesses. Companies like GoIndustry and ace-quote aim to provide these businesses with the enabling technical infrastructure to buy and sell products and services across borders and industries. The winners in this space will play a pivotal role in the new economy.

Winner: 'Gorilla' sites

In other words, huge ones. There are over one million registered domain names in the UK alone, but recent US reports suggest that 80% of all Web traffic goes to less than 4,500 sites. These share one thing in common - they are known to millions of consumers through well-executed and clearly understandable branding. In a world when your competitor is never more than a click away, brand becomes the main differentiator.

Winner: Automatic address books

Imagine the benefits of never having to change your friends' contact details when they move jobs. In today's global economy, people are more flighty than ever before and Ukibi offers people the ability to keep a shared address book online. This way, when friends move to another country, their details are automatically entered into your address book without you having to do a thing.

Loser: Paid-for Internet access

This is the biggest turkey in the e-economy at a time when the world appears to be moving towards a free basis. We have free content, free community, free personalisation and we should all have free access.

Director of research, Bloor Research, IT analysts

Rob Hailstone

The world is full of winning ideas for e-commerce, but most of them will only support a small number of players. Auction houses, e-procurement, portals - all are ideas that will be big business for a small number of players. The small guys will be weeded out quickly. The most important attribute for making an idea into a success is to build a critical mass of users before others can steal the idea and catch up. Here are some ideas with a bit more scope:

Winner: Supply-chain middleman

Be the organisation that makes it possible for businesses in a supply chain to integrate their processes. Become the foundation for a specific industry, not just individual organisations.

Winner: Syndication

Only the giants can provide every service. Rather than being a portal and pointing visitors to other sites - from where they may never return - use content syndication to bring the services of your business partners into your own site. That way you retain control and learn more about your visitors.

Winner: Compile demographics

Whatever the primary business model, collect the demographic data from visitors to your site. Ask them what their interests are, collect information about the pages they visit, discover where they are and what roles they fill. Organise and analyse the information - and then sell it. But see the dead duck on personal information.

Loser: Cyber-malls

The cyber-mall idea really sucks. Who wants to wander down a virtual street looking for a specialist shop only to find it doesn't sell what you want. Become a specialist instead.

Loser: Dependence on ad revenue

Banner ads and "click-through" business models are time-expired. There are too many sites chasing too little revenue. Find another way of making revenue from your information or entertainment site.

Loser: Selling personal data

Just don't do it. Even if you are not interested in civil liberties, this just invites bad press and hacker attacks. Make sure visitors are fully aware of the use you will make of personal information and give them the ability to opt out at any time.

Chief marketing officer with e-business integrator, Scient

Chris Lochhead

Winner: New business models

E-business is the battle of business models. Taking an old business model onto the Net means you'll get killed. Examples of better business models are companies who use the Internet to create "value innovations". These could be price, convenience, selection, reach, speed, personalisation.

Winner: Clicks-and-mortar businesses

In the new "dot-conomy" customers want to dictate how, when, and where they want to do business. The e-businesses that empower the customer to choose their channel - wireless, Internet, kiosks, physical location, dealer, call centres - will win by becoming the easiest provider in their market to work with. But remember, if you've got a great brand already - it is not compulsory to leave the best elements off the Web.

Winner: Re-intermediation b-to-b

There are a lot of cost and speed inefficiences in most value chains. The business-to-business exchanges with the biggest chance of winning are the ones that are a joint win for existing industry players and end customers. These are not e-business that try to disintermediate channel players. If you have to cut off your nose, why make your face angry too?

Winner: Aggregation vortals

Vertical portals "vortals" which aggregate products, services and capabilities around the needs of customers or markets from many different suppliers, thus become the one place to go to met all your needs in that vertical. No-one in business has unlimited time to "window shop" lots of sites on the Net. Look at the success of UK out-of-town shopping centres - one site with lots of shops.

Loser: Retail b-to-c business models

Many of these companies are trading below their IPO prices because they don't have a competitive advantage. They are just shopping catalogues on the Internet. I would rather go down to the shops.

Loser: Content- or community-only

These have been done to death in almost every market. It is very hard to make money with just advertising as the revenue model. To be successful you need multiple revenue sources. In addition, large traditional media companies are embracing e-business quickly. These guys are seasoned vets and they have an advantage given their brand stature.

Loser: Mass media portals

The battle is over. Yahoo and AOL won.

Loser: We pay you to use our service - plays

There are large number of e-businesses emerging who pay users for surfing, searching and other activities on line. There is a fundamental misunderstanding of the term customers here. Most of these plays will die off.

Robin Tye - partner, e-business, PriceWaterhouseCoopers management consultants.

Web companies are founded by four types of people - the new entrepreneur, serial entrepreneur, rejuvenator and incumbent. Each group will succeed or fail for different reasons.

The new entrepreneur Business-to-consumer projects are much more likely to fail than launches based on business-to-business trading. The odds of getting a business-to-consumer idea off the ground are 1-in-30 because most business-to-consumer ideas are quickly copied. In contrast, the business-to-business success ratio is around 1-in-10, because business-to-business companies are usually created by people who understand an industry and can demonstrate to potential backers that the idea will improve processes or lower costs. Both types of new entrepreneur will fail if they do not surround themselves with a team of advisors. Nobody today can create a dotcom on their own - there are 13 tax issues alone which can kill a start-up in its first month. Winner Business-to-business professionals Loser Business-to-consumer amateurs

Serial entrepreneur They have been through the process before and understand the need for speed and expert advisors. They increase their chances of success by creating applications that are difficult to copy. Today's serial entrepreneurs are looking at killer applications for leading-edge mobile connectivity, such as GPRS. Winner Cutting-edge thinkers Losers Existing technology followers

Rejuvenator - Up and running for a couple of years, rejuvenators need to revitalise their sites to keep ahead of competitors with newer technology. Their key issues are timing and money. Going back to the markets for new cash could catalyse their downfall. Winner Market favourites Losers Ditherers

Incumbent Bricks-and-mortar businesses need a Web presence but face major issues, such as creating an electronic route to market without cannibalising real-world sales or undermining existing distribution channels. They may play with dozens of ideas but eventually they will need either to set up a separate Web entity or entirely change their corporate structures. Both alternatives are risky - and, potentially, hugely profitable. Winners Sales expanders Losers Internet disparagers


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This was first published in April 2000

 

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