The Net Business Model
Consolidates and Deepens

Today the weak have been and will continue to be swallowed up by those higher up the food chain. No longer is the Swiss Army knife the model.Today, the model is the application or business which does one thing extremely well, and frequently is web based.

Like any new medium, the Net is undergoing rapid change, perhaps more rapid than any before because so many people are working so feverishly to develop new business models and the stakes are so high. Equally important, Net users are no longer cyber-rubes just happy to see the graphics move and the screen change.Now, an increasingly large and influential segment of Net users is composed of businesses like Dell, selling millions of dollars of merchandise a day. Their expectations of the Net are sophisticated and demanding. Down the food chain, even smaller businesses are expecting more, if not today, then tomorrow.

Net sites today are consolidating, becoming deeper and more focused. Gone are the days when every entrepreneur who could raise the cash wanted to rush on the Net and put up a Portal with news, content and community for just about everybody. These had a tendency not to be well thought out, required a $20 million national roll-out just to start building a brand, and many,if they even got off the ground, had a half life of 4 months. The other half was a sputtering out money crunch so ugly you wouldn't even want to hear about it.

Today the weak have been and will continue to be swallowed up by those higher up the food chain. A once euphoric stock market and the remaining steely eyed venture capitalists now taking a closer look at which sites and which business models really offer value.

The Net business models which seem to be prevailing are more narrow and focused than before. No longer is the Swiss Army knife the model - the package of tools which can perform a half dozen tasks moderately well. Today, the model is the application or business which does one thing extremely well, and frequently is web based.

Community formation is still one of the distinguishing characteristics of the Net. Many of the procurement sites, where products and services are put out for bids,marketplaces , where buyers and sellers are matched up or vertical portals which offer news, content,and a buying and selling platform frequently revolve around a particular industry or community. Now, however, the community does not merely chat or even network - it actually does business among its members, which is a very positive progression.

Increasingly business on the Web is going global.In a sense, websites have always been global in that people could view a website from all over the world, but , as a practical matter, they may have had difficulty purchasing services or merchandise with no supply chain or payment infrastructure in place.. Today, the big players on the Net like eBay and Amazon and Yahoo are rolling out in different countries simultaneously or setting up beachheads in strategic locations. Working through a tangle of different regulatory and taxation laws, plus an analysis of local customs, purchasing habits and payment methods requires deep pockets and generally an initial period of losses. All of these factors drive the trend towards consolidation. Still, some well funded start ups do cross the pond to Europe or focus on Asia or developing nations, knowing there will be fresh sources of capital in those markets.

So, even as one phase of the Net trails off, a new phase surges up. Anyone with a new product, service or approach can still get on the Web and compete, using the value of hindsight to see what has worked in the past and foresight to see which way the global winds are blowing. The real drivers behind the new surge to globalization, as well as the increased sophistication and deepening of Net offerings, is the vision, energy and persistence of the entrepreneurs behind these new companies and the family, angels or VCs who take the bold leap to finance them.

Even in this era of consolidation, one comes across those exceptional individuals who can be judged visionary or crazy depending on your comfort level with risk, who've sold their homes or had their mothers sell their home to raise capital for a new Net related venture. The author met such a founder just yesterday who, along with 2 friends risked it all, and was just receiving a $500 million round of financing from very big name players. Big ambitions require big risks, but it is still possible, even in the midst of consolidation to move boldly ahead and reap big rewards.