Microblog: Don’t do indirect business models

Today we publish the third in a series of microblogs in which I present some of my views on work, entrepreneurship and building a company.

Don’t do indirect business models

So you have found a big problem that needs solving. Great. Now you have to figure out your business model: how is your new company going to make money? You can use the business model canvas to see what your business world is like and test various models. In the end it boils down to a simple spreadsheet. Hell, if you do it right a business model on a beverage coaster will probably work.

For me good business models have one thing in common: they are direct business models. If you want a company to last in the long run, and if you want a sustainable business, direct models are the way to go.

Let me give you a few examples of conflicts of interest in indirect business models.

The first one is Twitter. Twitter has API’s and 3rd parties can’t build apps with these API’s. Apps that are better than the native Twitter experience. Apps that can block the Twitter adds. Because ads are an indirect model, Twitter does not want 3rd party apps that are better because they lose revenue. Customers using the apps unhappy, app developers unhappy.

The second one is the advertisement model surrounding news and publishing sites. Nobody likes ads. Ads are just noise. News papers aren’t happy about selling them, consumers aren’t happy with seeing them. The news site De Correspondent found a better direct model. They have 40.000 subscribers that pay € 60,- a year. You get great in depth articles you can read anywhere and for free. You don’t see any advertisement, they don’t have to look for advertisers and the only thing they do is ask users to become a member if they like what they read.

Direct business models align the interest of partners, users, employees and funders.

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