Business
models are perhaps the most discussed and least understood aspect of
the web. There is so much talk about how the web changes traditional
business models. But there is little clear-cut evidence of exactly what
this means.
In the most basic
sense, a business model is the method of doing business by which a
company can sustain itself -- that is, generate revenue. The business
model spells-out how a company makes money by specifying where it is
positioned in the value chain.
Some models are
quite simple. A company produces a good or service and sells it to
customers. If all goes well, the revenues from sales exceed the cost of
operation and the company realizes a profit. Other models can be more
intricately woven. Broadcasting is a good example. Radio and later
television programming has been broadcasted over the airwaves free to
anyone with a receiver for much of the past century. The broadcaster is
part of a complex network of distributors, content creators, advertisers
(and their agencies), and listeners or viewers. Who makes money and how
much is not always clear at the outset. The bottom line depends on many
competing factors.
