Which Business Model?

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Here's the story of Robert Seidman's thinking process about how to make money online. It comes from the May 10, 1998, Seidman's Online Insider, a free e-commerce mailing list. I've been getting it for about three years, but it's been around for five. I read or at least skim it every week because it has interesting info bit but mostly because of Seidman's analysis. Over the years, he has helped me think about new media.

Fee Vs Free

Long-time readers have come to know my struggles with trying to find a business model. Almost 3 years ago, Mary Meeker, new media analyst at Morgan Stanley Dean Witter wrote that I had the potential for a great business model. So far, I haven't made Ms. Meeker look too smart on this score, but I'm trying to change that.

Meeker thought the model would be for me to begin charging for the newsletter. This sounds really great in theory. I mean, there are over 23,000 addresses on the list right now. Measuring people and readership is difficult with a free newsletter, so I stick with the only concrete thing I have -- e-mail addresses. This is misleading too, because it doesn't take into account pass-around or that some people are on the list more than once, or that some of the addresses themselves are mailing/distribution lists. But no matter how you slice it, if 23,000 people were willing to pay a mere $10/yr., it's not a bad business for me. I won't be retiring soon, but I can live nicely on that kind of revenue.

The problem of course is that 23,000 people won't pay $10/yr. In the modeling I did, I concluded 95% of you wouldn't pay ANYTHING. Then there are 5% of you who would pay something ranging from $1/yr to $2,000 year. Given the way the price elasticity models worked out, the best price I could charge would be around $800 yr. Not all 5% would go for that, of course, but given the price elasticity, it was the figure that yielded the most overall revenue. But such a model still has its problems. There can be nothing without some "free" newsletter, so what content would go in the free newsletter vs. the fee newsletter? Like advertising, this is something I'd rather avoid figuring out.

What's That Leave?

Well, short of advertising or subscriptions, there are a couple of options. One is that I can do consulting or go back "to work". As a result of the newsletter, I get some nice opportunities. I'm not adverse to consulting or full-time employment. But, I'd like to figure out how to leverage the newsletter more directly as an income generator. Factoring out subscriptions and advertising, that pretty much leaves: try to sell you something! And that's what I plan to do.

Enter Mark Hurst

Mark Hurst's company, Creative Good, is billed as "the Web's first ease-of-use agency". Hurst has a B.S. and Masters in Computer Science from MIT and has done a lot of work focusing on making web sites easier to use. I met Mark at an event in New York last December and we hit it off immediately.

We both REALLY hated Netscape's home page design at the time (we both like the new design better than the old one, but...). It turned out that Mark also lives in Westchester County, so we got together a few times over food to discuss the state of the Internet and shoot the breeze in general. Finally, I asked Mark for a sample of his work. He gave me a brief (I'd say around 20 pages) report he'd done recently for one of his clients. After reading it, I thought "Man, I have to figure out a way to work with this guy!" So I called Mark up and said, "I loved your report! I have to figure out a way to work with you!"

Mark thought on it and pitched me with the idea of collaborating on a report. It would give us an opportunity to see how well we'd work together and hopefully make us a couple of bucks and get Mark some exposure for his company. I liked the idea a lot. It gives me something to sell you (my readers) that I believe in -- hype-free, useful reports.

A Company Is Born

Early on we both realized it was pretty cool working together, so we formed a company for the purpose of creating and selling the reports, Good Reports LLC. Our plan is to do a series of reports on Internet business.

Our First Report

Our first report, "In Search of E-Commerce: Lessons from the Internet's Top Sites," will be available for purchase on June 8.

We understand that security is a concern, but we don't believe it is single- handedly holding back e-commerce. The truth as we see it, is, to paraphrase Walt Mossberg, "E-Commerce is too hard to use, and it isn't your customer's fault." Even these top sites often make it too hard for their customers to buy. Even if it accounts for only a 2% of sales (and we think it is much higher) who among you would willingly blow off that 2%? The premise is simple: the EASIER you make it to BUY, the more your customers WILL BUY. Increased ease-of-use brings increased sales and increased revenues. We'll show you how to make your sites easier to use.

The report is aimed at companies dealing in retail e-commerce, design companies, consultants who work with design and e-commerce retailers and analysts who want to get a read on how well the companies they are following are doing in terms of making it easy for their customers to buy online.

In the report, we focus heavily on the barriers to buying. After reading the report you'll be able to analyze your site (as well as other sites) easily be able to determine the barriers to buying. You will be able to say "A ha! I see the barriers!" Then you'll be able to remove them and increase your sales.

We don't know of any consultants or design firms focusing on ease-of-use anyway (besides Creative Good). But you'd pay consultants or a design agency (even Creative Good) a LOT of money for the lessons taught in our first report. So we feel it is quite reasonably priced at $1,495 if purchased by telephone or via U.S mail. For bargain hunters, it'll be $1,295 if you buy it online.

There's nothing in the way of content up on the site yet, but if you go to < http://www.goodreports.com >, you'll be able to add yourself to a mailing list to get more info once the report is available.

Business Model

If 100 of you buy the report and we do 3 or 4 reports a year with similar results, we'll have a REALLY good business. If a THOUSAND of you buy it we have a REALLY, REALLY, REALLY good business. See, we have one thing going for us. We don't really have any overhead to speak of. Compare this to companies like Jupiter, Forrester, Gartner, etc., who have LOTS of overhead to worry about. This is the power of the Internet.

For Good Reports LLC, it will be a test to see if we can sell the reports and make a business. For me, it will be a test to see if an almost four-year labor of love has provided me a way to make a living doing what I really like to do without getting into ethical and administrative stuff I don't really want to deal with.