1. The Internet business : success
stories, business models etc.
A talk to PGP1 & ABM1 students at IIMA
Rohit Varma
December 17, 2015

2. Why you are doing this course !
Grades
Interest in technology
Work in Financial services
Work for Internet company
Start-up

3. Agenda
• Success stories
• Business models
• Execution challenges

4. I. SUCCESS STORIES

5. The pioneers

6. Yahoo.com
1994Web Directory

7. Aol.com
1985Online portal

8. Amazon.com
July 1995Bookstore

9. Ebay
September 1995Online auctions

10. Rediff.com
December 1995News

11. The later entrants

12. Google
August 1998Search engine

13. Alibaba
December 1998Wholesaler marketplace

14. LinkedIn
May 2003Professional network

15. Facebook
February 2004College network

16. You Tube
May 2005Video-sharing

17. Recent entrants

18. Android Market (Google Play Store)
2007

19. Uber
2009

21. Succeeding at an Internet business:
Some learnings
1. A clear need is a prerequisite
2. An original idea matters
3. The business may pivot
4. Timing matters
5. Geography has mattered

22. What do we mean by a successful
Internet business
Usually it means being successful at 2 things:
1. Users
2. Usage
Given the above, revenue usually follows..

23. And here are just a few
of the many things you
need to know about
Internet users and usage..

24. What do users do on the Internet
• Communication
• Information
• Transactions
• Entertainment

25. Worldwide number of Internet users

26. Internet usage (hours/user/day)

27. Indian Internet users
Growth in users
Year Users (million)
2000 10 million
2010 100 million
2013 200 million
2014 304 million
2015 402 million
2018 550 million est.
Other key factoids
1. Connectivity speed has been an issue
2. Of 51 million SMEs, only 2 million are online
0
100
200
300
400
500
600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Seri…

28. II. BUSINESS MODELS

29. A business model: What’s that?

30. Internet business models:
By revenue line

31. The Internet media
business model

32. Internet media business model:
Revenue lines
1. Advertising
2. Subscriptions
3. Syndication

33. Media business model: key metrics
• Number of users
• % active users
• Time spent per user per day
• ARPU (average revenue per user)
• Market Penetration (market share)

34. Facebook: Key metrics
• Monthly active users: 1,545 million
• Daily active users: 1,007 million
• Revenue: $ 4299 million (Q3, ‘15)
• ARPU (average revenue per user): $2.83
Market penetration = ?

35. Internet media: Revenue trends (U.S.)

36. The Internet transactions
business model

37. Internet Transactions business model
1. Ecommerce
- stock & ship e.g. Amazon U.S.
- marketplace e.g. Snapdeal
2. Product subscriptions
e.g. Alibaba, Justdial, Naukri, Shaadi.com,..

38. Ecommerce business model:
key metrics
• Registered users
• Traffic to site/app
• % conversion
• ARPT (Average Revenue Per Transaction)
• GMV (Gross Merchandising Value)
• Gross margin
• Costs (Product + Logistics + Marketing + Overhead)

39. Flipkart: key metrics
• Registered users: 46 million
• GMV $3 billion (2014-2015)
• Upto 8 million shipments/month
• 14 warehouses
• 4000 sellers (March 2015)
• Own shipments ~ 70%,
third party sellers 30%

40. Media vs Transactions business model:
Facebook vs. LinkedIn
Facebook revenue :
96% ads, 4% subs
LinkedIn revenue:
18% ads, 82% subs

41. Internet business models:
Other modes

42. Other Internet industry business models:
By type of entities
• B2B & B2C
• C2C & C2B
• B2G & G2B
etc.

43. Other Internet business models:
Products vs services
• Products is the business which gets the most
attention..
• Internet services are also a big segment
e.g.
- ISPs
- tech platforms
- digital marketing…

44. Online marketplaces
• Products – Amazon, Ebay, Alibaba
• Services – Uber, AirBnb, Instacart, Uber
Trend: Products => services

45. Internet business models:
By value drivers
1. Disintermediation
2. Network effect
3. On-demand

46. Network effects & pipes vs. platforms
PIPE
• TV
• Encyclopaedia
Brittanica
• Classroom-based
learning
• Big Bazaar
PLATFORM
• You Tube
• Wikipedia
• Coursera
• Flipkart
Note: Network effects happen with platforms

47. Network effects are being fuelled by
certain type of content
• Content – user generated, curated
• Reviews, stories, audio, video, pins, photos, ..
• 12-24 year olds are trendsetters..

48. On-demand services
• Uber
• Air BNB
• TaskRabbit, Instacart
• TaskBob, Holachef…
• A sharing-cum-ondemand economy is
underway
• Key drivers: cloud, social and mobile

49. Internet business models:
Summing up
1. Media and transactions are the key Internet
business models
2. Driving users and usage is the key
3. Can vary by entities involved (B2B, B2C, B2G …)
4. May be products or services
5. Important value drivers:
Disintermediation
Network-effects
On-demand

50. III. EXECUTION CHALLENGES

51. Executing a successful Internet business:
Key questions/challenges
1. How do you choose your product?
2. How do you size the market ?
3. How do you ensure your product gets users?
4. How do you build a team?
5. Should you take funding?
6. What do you need to get funding?

52. How do you choose an idea
• Consumer Internet: Personal Passion
• Enterprise Internet: Company pain points

53. How do you build a team
• Founders
• Associates

54. Do you take funding?
• Funded Internet business
• Boutique business

55. What do you need to get funding
Demonstrate Unfair advantage in a scalable
business
“Unfair advantage is a unique, consistent
difference in product attributes and services
arising from a company capability gap based on
delivering superior value over long periods of
time to the customer”.

56. One last word..

57. The Internet..where is it all going

58. Thanks !
Rohit Varma
Interskale Digital Marketing and Consulting
linkedin.com/in/rohitvarma
slideshare.net/rohit28