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Business Models In The New Economy

To succeed in the old economy, companies found methods of doing things and then executed those models better than the competition. But in the Wild West of the Internet, today's accepted methods could be tomorrow's failures. That's why the evolving business model is one of the most critical issues for netpreneurs to track. Companies must always be thinking about future models and planning for them.

"I keep a profile of all our competitors," says Thomas Dalton, 38-year-old co-founder and vice president of sales at USBid.com, a Melbourne, Florida-based business-to-business site that brings together buyers and sellers of electronics components. "There are constantly people entering the space, and the business model is constantly morphing."

Early business-to-consumer models were based on attracting and retaining eyeballs (viewers). Web sites would give away content to attract viewers, then sell the eyeballs to advertisers. When advertising didn't pay the bills, the model transformed to include transactions. Suddenly, e-business wanted paying eyeballs.

Eventually, that model segmented into different methods of charging for transactions: direct selling (Amazon.com), demand-collection systems (Priceline.com) and auctions (eBay). And there are some analysts who think the next great business model won't deliver any physical inventory at all; they believe tomorrow's e-businesses will sell only digital content delivered online (such as books, music, movies and more).

You can expect new technology and applications to occupy a big chunk of the time you spend in self-education. And if you don't know the latest technology, you'll surely become dependent on others who do-which can get expensive. "Consultants get paid more to install expensive systems," points out Ben Narasin, 35, founder and CEO of Fashionmall.com, a virtual mall in New York City that sells space on its site to fashion, footwear, accessories and beauty retailers. "On a company site tour, I saw one company using two Pentium computers to accomplish what other companies were doing with $100,000 boxes." Narasin duplicated the setup at his own firm and saved money.

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