The Wide World of Web Business Models

By Maureen Alley, Managing Editor

Web business models are as versatile as the businesses themselves. Whether the plan is for long-term success or to sell the company, all Web businesses have one goal: success.

Jason Fried, founder of Chicago-based 37Signals launched his company in 1999, originally to build and design websites for clients that were easy and simple. In 2004, the company transitioned to software development with the introduction of its Basecamp project management software. "We created it because we needed a tool to manage our clients. We decided to sell it as a product and a year later it was doing well," Fried says.

Many aspects of Fried's business model are unique but it's his staffing philosophy that stands out. "We try not to grow internally. We can pay people more if we want but we don't like to hire more," Fried says. "We like being understaffed because it makes us honest at solving simple problems. When you have a lot of people, you want to keep them busy."

Another interesting aspect of Fried's business model is there is no long-term plan. Instead, Fried plans for today and tomorrow. "I've never been a fan of long-term plans because you make them as one person and you're someone else when they happen," Fried says. "Too many companies plan on what's going to happen next and miss out on what's happening now."

But for Joe Essenfeld, president of newly-launched localbacon, the long-term goal is important in order to have a clear vision of how to scale the company and be successful. localbacon was launched at TechCrunch50 in September and offers a unique spin on job posting and job hunting. "The short term goal is to attack the New York market, and once we establish critical mass here, expand across the nation," Essenfeld says. The company hopes to expand in June to others.

The long-term goal for Jack Groetzinger, co-founder of also newly-launched Seatgeek, is only as far as it takes for someone to purchase his startup.

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Groetzinger has experience with growing startups and selling them to interested buyers. In 2006, he launched Evolving Vox, a site for college students to temporarily own furniture. And, in 2007, he sold it. He also launched Scribnia, grew the site and sold it within seven months. "The long-term goal for anyone serious about startups is to sell it," Groetzinger says.

But that doesn't mean Groetzinger isn't focused on how to manage his company now. Rather, quite the opposite. He relies on cloud hosting to handle spikes in traffic, outsourcing of tasks, and chooses different marketing strategies, depending on the site. "Scribnia relied on social media because it was a recommendation for blog content. But for Seatgeek, we're using a PR strategy. It forecasts the prices of sports and concert tickets so you can create regional news easily. Then we provide that information to local newspapers that need it, which helps us get mentioned," Groetzinger says.

With publicity also comes criticism. But expecting a roller coaster ride is one important tip Essenfeld offers other Web business owners. "You have to be ready for people to give their honest feedback, and don't take it personally," Essenfeld adds. "But most importantly, you have to be able to simply explain what your company does. Take the elevator pitch down - that's essential."

Fried agrees that simplicity is the key to managing a successful business. "Clarity is what matters - make things simple," he says. "There are always two ways to do something - an easy way and a hard way. Always do the easiest first because it's usually right - it's faster, easier and requires fewer resources. If that doesn't work, then try the hard way."

How do ecommerce merchants manage business growth?
Two Website Magazine readers provide their most important tips for success.

Taking the time in the beginning to fully understand what each of your goals entail and planning for them is the key to curbing wasteful spending and unnecessary overhead in a period of business growth.
- James Schoaf, Web development manager Online Stores, Inc.

The key of success for a brick-and-mortar store is the renowned motto: "Location, Location, Location." For a Web store it's "Customer Service, Customer Service, Customer Service." Answer your phones, reply to your e-mails (promptly) and list all your methods of contact with a prominent link in your Web pages.
- Marco Margaritelli, founder, president Artistica Italian Ceramics,