For every Internet success story, there are hundreds if not thousands of projects that never reached the tipping point into a profitable business model. If you think you have a great idea for “the next big thing” on the web, see how your idea stacks up against these important success/failure factors:
Will passionate/knowledgeable people be running, or otherwise closely associated with, the venture?
Lots of passion and knowledge will be key factors in the success of the project. The pursuit of riches in the absence of passion for the product/servce will only get you so far.
Is the product/service digital or physical?
If the product or service is purely digital (think iTunes), then this can reduce significantly reduce setup costs (so less investment to lose if things don’t work out) and the complexities/hassles associated with managing physical product: no manufacturing, no stock, no postage, no damaged goods, instant worldwide delivery, etc.
What is the volume and quality of existing competition?
Obviously the lower the volume and quality of direct competition, the better. If your project is so off-the-wall that there is no direct competition – great! But then of course you’re in uncharted territory and need to convince the world of the “must have” nature of your offering.
Do you have a strong marketing plan (and the funds to implement it)?
With so much competition online, effective and ‘sufficient’ marketing can make or break an online project. Your marketing budget might need to be many multiples of your website development budget. If pre-existing marketing channels/relationship exist (e.g. due to your own existing business activity in the industry), this can dramatically reduce the cost of marketing and increase the chance of success.
Note that it can be extremely difficult/expensive to protect your IP (Intellectual Property) online, and sometimes marketing (more and higher quality) is what separates the winners from the losers. Example: many highly successful and profitable websites are not (in the scheme of things) that hard or expensive to replicate but unless you can compete with the marketing budgets behind them, you won’t stand a chance unless you’re offering something distinctly different/superior. Think www.carsales.com.au or www.seek.com.au.
Can you be the best in the world at this?
If you’re starting a new venture, we strongly recommend that you start out with, and hold true to, the mindset that you can and will be the best in the world at what you do. Have a read of “Good to Great” by Jim Collins if you need convincing: http://www.jimcollins.com/article_topics/articles/good-to-great.html
How niche is the product/service?
Niches can be very profitable. Niches are good because, assuming you are passionate and knowledgeable, you have a better chance of making a larger and quicker and longer-term impression in a market than otherwise. The more mainstream you go, the more vulnerable you are to one of the massive global players deciding to enter your market. If you’re really lucky and/or smart, they buy you out.
To what extent will ‘people power’ help generate content on, and enthusiasm for, the site?
YouTube, Facebook and the iTunes Store would be nothing without content. Masses of content. And who supplies the content? They don’t. We do. They supply and develop the website ‘framework’, we (the people of the world) do the rest. Why? Because we enjoy doing so and/or are financially incentivised to do so. If you can harness global people power on your site, the results can be explosive.
Are you clear on your primary revenue streams?
If you’re relying on advertising revenues alone to generate sufficient return on your investment, then you may well end up being disappointed. Far better, if possible, to aim for some sort of revenue-share model where customers are happy to pay for the content, ‘suppliers’ are incentivised to create and upload content, and you take your commission.
What are the likely costs of supporting, maintaining, and upgrading the site?
Just like owning a boat, the initial purchase price of a website is just the beginning in terms of cash to keep it going and enhancing/upgrading it. Is yours a high or low maintenance site? Obviously the more you can invest in making the site self-sufficient, error-free, and extremely easy-to-use, the better. To what extent will your project be dependent on (expensive) ‘real people’ providing help and support to customers, and what sort of service levels (e.g. guaranteed response times) will you aim for?
Hook into everything.
Don’t make your site an island. People are increasingly demanding and expecting that some or all of your site will be accessible outside of the site itself, e.g. via Facebook, or their iPhone. Indeed, just by creating a Facebook or iPhone ‘app’ (application) you’re exposing your site to a much wider audience than if you expect them to come in via the front door.
Don’t hold on too tight.
Is it better to own 100% of nothing, or 20% of something very big? Unless you’re a multi-millionaire who can afford to own the project outright and (worst case) lose the lot, plan to attract investors (seed capital) at an early stage. You’ll almost certainly need the extra cash to give your project the best possible chance of moving past the tipping point and into truly profitable territory.