Getting Popular

Get Popular
Business models are a very important aspect of an Internet startup.  Without a strong model a company can not succed.  In brick and mortar stores, the business model can be the main driver to profits.  However the model is not the only important aspect.  Especially with Internet companies, a key challenge for companies is to "get popular".  But how can a company get popular?  They can't just join the football team or write a hit song.  If the company wants customers, they have to combine differentiation, marketing, and the network effect.

Paying For Friends

One way to generate interest is to put some money into marketing the company.  For brick & mortar, marketing is generally to differentiate, but for an Internet startup it is important for marketing to teach the consumers about the new company and to get the name out there.  Spending a little money can get you some customers.

Spreading Rumors

Marketing can be quite expensive and for a new company it may not be feasible to reach the target audience with the initial budget of the company.  In those terms, Internet startups need to rely more heavily on "word of mouth" than brick & mortar companies.  If the company can get some key users and influencers to use their product and to see the benefits, they can get those rumors spreading.  If somebody close to you tells you that a company is exciting and helpful, you may tell a friend and etc until everyone in the world has heard of you.  While the whole world is probably not feasible, you can establish a decent network from positive word of mouth.

Becoming The Homecoming King

While marketing and word of mouth help get the company name out there, it is all useless unless the company has some kind of lasting use to the consumer.  Therefore a company will have to become the most handsome and perfect boy in the whole school.  They have to have an interface that is nice to look at and easy to navigate.  They have to have software that has no flaws.  They have to target a consumer need and not only fulfill that need but go above and beyond.  If they can become the king over the competition, the whole school will know that they are the best choice.  This concept also works with brick & mortar, but I think in those cases based on location, there can be multiple kings.

Dating The Prom Queen

So far you have a company that is known around town, that has very good Internet presence and features that the consumer enjoys.  However the Internet causes everything to be more interconnected, it is often important for a good startup company to form partnerships with other good Internet companies.  This kind of partnership can be mutually beneficial, and can grow the networks of both companies.  If you can hook up with the right company, the prom queen, you can use each others strengths to grow.  Forming partnerships is less important with brick & mortar stores, as it would be hard for a Starbucks to partner with a best buy, unless they were located in the same building.

Avoiding Becoming A Mechanic

It always seems that ten years after high school is over the nerds are millionaires and the popular kids are working at gas stations.  For the startup or the brick & mortar, you don't want to go down the latter path.  As time goes on, the company will begin to mature and they can no longer succeed being the young fresh high schooler they once were.  There are newer companies in town, and a new homecoming king.  However that does not mean that life is over.  A company must change over time.  As the company matures, they must make changes that help them sustain market share and generate profits.  This could mean tweaking some software, offering new features, or entering a new market.  They can no longer succeed based on being the most popular kid at school, and must now sustain their competitive advantage through more intense strategy.

School's Out Forever

MusicJuice.net had a business model that was successful in Europe.  One possible reason for a slow start could be that due to cultural differences.  The business model could not adapt to other countries.  However, one key the lack of success is that they did not "get popular" as described above.  Music Juice could not generate a large network of users, and they did not have a good interface or set of features that consumers could relate too.  Word of mouth never took off, and the company brand never became well known.  The company didn't have any important partners like an Amazon or a Facebook that could grow their network.  Their success relied on them becoming popular and developing a large network of users, and they could not accomplish that.