Starting Online Businesses

Characteristics of Successful Online Businesses

Written by James Garvin for Gaebler Ventures

There are three core online business strategies that have proven successful since the advent of the internet. This article will review those three business processes and how entrepreneurs can leverage the insight into these processes to execute their own successful online business strategies.

The internet has created rich opportunities for entrepreneurs.

Since the advent of the internet, numerous businesses have been founded due to the relatively low barrier to entry and has created tremendous economic value for the firms that have thrived. This article will review at a high-level the characteristics that successful online business share in hopes that you as an entrepreneur can leverage them in your own online ventures.

In one sentence, successful online businesses enable individuals and businesses to perform activities that are more efficient than or not feasible offline. This in a nutshell is the main attribute of a successful online business. If business or activities can be conducted offline just as efficiently as online, the online model will not be successful unless it drastically alters the way in which activities are conducted. Successful online business models can be broken into 3 core business categories:

1.) Long Tail

2.) Platform Networks

3.) Information Transmission

Long Tail – The long tail business category can be defined as a strategy that enables firms to provide access to unique goods and services in small quantities. Examples of companies that have thrived from the long tail business process are Amazon, Netflix, and Café Press. Amazon enabled consumers to search for and buy just about any book that was ever published. Netflix enabled consumers to rent just about any DVD that was ever produced, and Café Press enabled small-scale creative artists to publish and sell their artistic designs online. All three examples can only succeed online because of the physical limitations that are brought about by the offline world. Imagine walking into a book store that sold Amazon's entire inventory.

Platform Networks – An online platform network enables people to transact and communicate in ways not possible offline. Successful examples include EBay, LinkedIn, and Craigslist. Like in the Long Tail, online platform networks remove physical barriers that the offline world presents and enables individuals to connect in very efficient ways. EBay brought together buyers and sellers who never had to meet to exchange their goods. LinkedIn allows professionals to connect to other professionals and leverage their network to search for new jobs or connect with others in their industry. Craigslist allows individuals to do, well just about everything, from find an apartment, search for a job, or find a date, but all in a manner that is more efficient that conducting those same activities offline.

Information Transmission – The third category describes businesses that enable faster transmission of information. This can include anything from online bill pay (vs. mailing a check) to Google Search (vs. the Library) to online trading brokerages like TD Ameritrade (vs. calling your broker). The internet provides the opportunity for information to be exchanged and analyzed in real time. Remember the days when you had to ask for directions or look at an atlas before driving to a new place? The internet enables you to now get directions with a click of a button.

In summary, the three models discussed above are broad categorizations of successful online businesses. If you are starting an internet business, evaluate where your business fits among these business models and try to understand how your business is like any of the examples discussed. If you are not creating an online business that increases offline efficiencies, re-evaluate your value proposition and understand how you can increase offline efficiencies by bringing your business online.

James Garvin began his education studying biotechnology. In recent years he has turned his interest in technology to helping two internet startup companies. The first business was an online personal financial network and the second was an e-marketing platform created to help entrepreneurs demo their web sites. Currently a student at University of California Davis, James is spending his summer incubating two new online businesses and writing about his entrepreneur experiences.

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