Q & A

Tadeck from Warsaw, Poland asks “Is there any categorization or in-depth analysis of business models based on the Internet?”

I was searching for some information, analyses and categorization for business models that are used in Internet-based businesses (basically: in the businesses that are conducted through the Internet).

I have found very valuable resources (eg. Michael Rappa’s categorization of business models, Internet Business Models page), but I am looking for more.

Do you know any credible source, any publication, about the categorization of business models on the Web, measurement of their efficiency, ability to become successful?

The more data, the more credible the data and the more sources, the better.

Also, if you have some personal thoughts about efficiency of Internet-based business models and you can share them, please do so.



As of today I decided to put a bounty on the question. The best answer will win. By best answer I understand pointing some previously unknown to me resources about some interesting study, categorization or measurement of successfulness of business models on the Internet.

Categorization is one thing, but the most value to me has data about the efficiency & ability to achieve success by specific business models. The more data, preferably followed by analysis, the better.

So, if anyone knows about any resources that could be helpful in analyzing ability to achieve success by different categories of business models on the web, it will be appreciated and eventually awarded a bounty from this question.

Thanks again

My Answer

Well “conducted through the internet” … is pretty broad statement.

  • Google is all about the number of times they can get people to click on an ad link.
  • Facebook are similar but their success metric is the amount of time they hold peoples attention (google only have you a few mins at a time, facebook is hours at a time).
  • Evernote have subscribers volume with a 10% conversion to paid clients, given they have millions of users then its “dedicated user base” which they can work with long term.

So metric that you could select from when building an internent business

  • Impressions per day. If your collecting money through advertising impressions then this is a good one.
  • Unique Visitors per day. If you listen to This Week in Startups then you will hear this metric come up A LOT.
  • Returning visitors per day/week/month. For long term sustainability of a lot of web properties this is key (like Facebook or Linkedin)
  • New Visitors VS returns. This is a good one to see if you have a high level of interest in the site. The stack exchange will probably use this as one of their key metrics
  • Severs per volume. How efficient are you, how fast can you scale. 1 server per 100 customers or 1 server per million customers is a big difference in your bottom line and your “need to re-architect your system” point.
  • Customer issues resolution rate. Open VS closed. This is critical in many businesses for long term survival … in the online world it is more so because your customers are likely to discuss your performance good or bad.
  • Points per sprint. For development how many additional function points can you get through per release of your system.
  • Technical debt backlog. Tracking this is critical as is making sure it stays fairly low. Too low and you won’t move forward fast enough, too high and you will hit a brick wall and risk a major failure “somewhere”.
  • Staff turnover rate. Average months served is critical for long term consistency especially on the technical side. A revolving door means nobody knows what is happening or where the technical debt is … basically all your code base becomes technical debt.
  • Mentions in the press. Old fashioned description but concept still applies. This translates to how many references there are either to as links or to you as mentions. Can be facebook, twitter, other people blogs, etc. There are tools which track this for you now.
  • Your google rank on your keywords.

General metrics for most businesses:

  • Profitability. Every company has this one and its a cheap shot 🙂
  • Cost of customer acquisition VS value from customer. This says how effective your being at extracting money from the customer. Get this ratio wrong and your out of business quick.
  • Life time value of a customer. Do they buy your product once so everything is stacked against the first sale or do they come back / get subscription in which case the first sale can be given away in order to get the long term value from the customer.

There are heaps more once I get into the swing of them but most people have probably stopped reading by now …

So for those that have made it this far the key thing you need to do is identify and track the ones that are important to you. Setup metrics / goals around each one so you have something to compare them to (is 50,000 a good number or not?) … then the key magic bit is to normilise them somehow.

The easiest way is to setup ranges of expectation per variable you are tracking:

Variable 1: (say unique visitors per day)

  • 1 to 100 is a 1
  • 101 to 200 is a 2
  • 201 to 5000 is a 3
  • 5001 to 50000 is a 4
  • 50001 to 500000 is a 5


Have about 5 – 10 buckets anymore starts to get meaningless (unless you use 100 which works well too). So now you have a common measure for all of your variables:

So you can then say

  • Profitability is 2/5
  • Issue Resolution is 3/5
  • Average Time on site is 4/5

And you end up with my company is 3.5 on my magic “going well odometer”


And to finish that thought off properly … Instead of one overall metric I would break “internet companies” down into a series of subcategories and then rank them against each other.

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