Connecting Audiences as a Business Model

The Internet has brought rise to a number of new business models. One that I’ve been particularly fascinated by are business models that aggregate a group of sellers and also identifies buyers at scale. These organizations connect the two in an efficient manner adding value for both sides. Netflix, GroupOn and Birchbox are all examples.

I characterize these business models as follows:

1. Discovery is at the heart of the business model

Netflix = new movies based on your viewing habits

GroupOn = new products/services in your local area

BirchBox = new beauty product samples

2. Online to Offline

Consumers are found online (discovery to sign-up to purchase) and the fulfillment is made offline (mail). Doesn’t completely apply to Netflix as DVDs become obsolete.

3. Secret Sauce

Netflix = complex recommendation algorithm

GroupOn = database. but value created questionable with so many competitiors.

BirchBox = ? If they are going to survive they will need to invest in some form of recommendation/personalization engine

4. Aggregate Sellers & Buyers

Netflix = movie studios. people who want a wide selection of movies/tv shows

GroupOn = small businesses with excess capacity. deal hunters.

BirchBox = beauty companies with samples. “cool” hunters - want to be in the “know”

What makes all of these business models interesting is that they scale and are profitable. People are willing to pay for something that they can feel and touch. It’s tangible.