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Rhodri Marsden

Journalist and musician Rhodri Marsden has been addressing common technology problems by stripping away the jargon and enlisting the help of readers in his Cyberclinic column in The Independent for the past two years.

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The online business models that definitely didn't work

Posted by Rhodri Marsden
  • Wednesday, 27 May 2009 at 05:32 pm
With the news that Facebook isn't quite as highly valued as it used to be, that Twitter is continuing to prevaricate over exactly when it might bringing in any substantial revenue, and with doubts blasting from all sides about the ability of online ventures to subsist on the meagre proceeds of online advertising, it might be worth reminding ourselves of a few online business models that once seemed eminently viable, but crashed as commonsense finally prevailed.

The success of both Flooz and Beenz was dependent on the idea that the internet required a shiny new currency to trade with. No-one working for these companies was brave enough to point out that people prefer their purchases to involve fewer currency transactions, not more, and that the web is merely an extension of the existing economy and not some seperate entity floating somewhere in the vicinity of Alpha Centauri. Few consumers could be persuaded to use cyber-currencies, and retailers weren't that keen on accepting them. Paypal's understated stroke of genius, meanwhile, was to sensibly stick to using dollars and pounds instead.

Countless startups noticed that city-dwellers were increasingly time-poor and wanted their every desire quickly transported to within arm’s reach, but you can't deliver low-cost items for free and expect to turn a profit. Kozmo.com was the most publicised American disaster, but British companies such as Urbanfetch also floundered as their cute concepts of providing free cookies with every order, or giving no-questions-asked refunds, quickly began to haemorrhage large sums of cash. Fickle consumers would place tiny orders to “see if it worked” and then never use the service again.

iCrunch was one of many disastrous music business ventures; even now, with iPods hanging off every other belt and CDs slowly replaced with hard drives or merely streams of data across broadband connections, the music industry hasn't really got the hang of flogging digital music to the masses. So the faith that dotcom startups had ten years ago was, in retrospect, almost naively charming. In 2000 iCrunch splurged large sums of money in advances to independent labels and bands to secure their digital rights. Spearmint, a niche indie act that I co-managed, received an upfront payment of £10,000 for the right to sell their catalogue online. The band only ever received one statement from iCrunch; precisely one mp3 was sold for 99p before the company went under – by which time the advance had long since been splurged by the band in a delighted frenzy.

Digiscents spent two years trying to persuade companies and consumers alike that the web experience would be considerably enhanced if smells could be "transmitted" over the internet. For it to work, it required the end user to buy an iSmell personal scent synthesizer. Despite this exotic item being featured on the front cover of Wired magazine in 1999, people generally had no interest in buying an iSmell personal scent synthesiser, preferring to spend their cash on a bigger monitor or a multi-function mouse instead. Today, if we want our web surfing to give us olfactory stimulation, we have to provide it ourselves. And most of us seem quite happy with that.

There are countless other examples of terrible business ideas that have bombed since the dotcom bubble. Nearly all of them are unified by being incredibly unpopular with the general public. Social networking platforms, by contrast, are magnificently popular – but how, and when, are they ever going to prise any money out of us? Or are they simply doomed to sink in the same way as all the above did?

Comments

almostwitty wrote:
Wednesday, 27 May 2009 at 07:40 pm (UTC)
I don't think the web itself has any business model that is different from the non-web business models. Offer services that people are willing to pay for.

Of course, the downside is that after paying £400 for a computer, and £20 a month for Internet access, most people won't be paying for anything else...
matgb wrote:
Wednesday, 27 May 2009 at 11:59 pm (UTC)
Social networking platforms, by contrast, are magnificently popular – but how, and when, are they ever going to prise any money out of us?

Um, doesn't both LJ (and now Dreamwidth) count as an SN? And don't they make money by subscription and extra services that users want to pay for?
rmarsden wrote:
Thursday, 28 May 2009 at 06:42 am (UTC)
Obviously it's now a fine line between social networking and blogging, and it's something that's getting increasingly blurred - but LJ predated MySpace, Facebook, Friendster, Twitter etc, and was set up as a blogging platform. One that just happened to make it very good for "keeping in touch with your friends".

The state of LJ would indicate that it hasn't done particularly well in flogging paid accounts and userpic allocations in sufficient numbers to keep the wolf from loitering outside the door, either.

Edited at 2009-05-28 06:43 am (UTC)
(no subject) - muffledsqueak - Thursday, 28 May 2009 at 09:31 am (UTC)
rhodri wrote:
Thursday, 28 May 2009 at 10:14 am (UTC)
Ooh, interesting. Thank you.
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Tuesday, 17 November 2009 at 06:33 am (UTC)
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kalie_b wrote:
Wednesday, 6 January 2010 at 05:53 pm (UTC)
Even the failures should be sources of learning for those of us who want to start an online business. Keeping an online business today is not what it used to be, there are a lot of things to consider. For starters, if you want a successful business definitely need a successful website, that one of the first main conditions. Advertising is another very important aspect, online advertising has a lot of ramifications, you need to know how far you can afford to spread.
Kalie, network affiliates
newmoviesondvd wrote:
Sunday, 7 February 2010 at 04:25 am (UTC)
That is so sad about icrunch. I guess people still like going to the stores to buy cd's...
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