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90 Part 1 Introduction

1 Concept
This describes the strength of the business model. It includes:
potential to generate revenue including the size of the market targeted;
‘superior customer value’, in other words how well the value proposition of the service is
differentiated from that of competitors;
first-mover advantage (less easy to achieve today).

2 Innovation
This criterion looks at another aspect of the business concept, which is the extent to which
the business model merely imitates existing real-world or online models. Note that imitation
is not necessarily a problem if it is applied to a different market or audience or if the experi-
ence is superior and positive word-of-mouth is generated.

3 Execution

A good business model does not, of course, guarantee success. If there are problems with
aspects of the implementation of the idea, then the start-up will fail. Aspects of execution
that can be seen to have failed for some companies are:

promotion – online or offline techniques are insufficient to attract sufficient visitors to the site;
performance, availability and security – some sites have been victims of their own success and
have not been able to deliver fast access to the sites or technical problems have meant that the
service is unavailable or insecure. Some sites have been unavailable despite large-scale adver-
tising campaigns due to delays in creating the web site and its supporting infrastructure;
fulfilment – the site itself may be effective, but customer service and consequently brand
image will be adversely affected if products are not dispatched correctly or promptly.

4 Traffic
This criterion is measured in terms of the number of visitors, the number of pages they visit
and the number of transactions they make which control the online ad revenues. Page
impressions or visits are not necessarily an indication of success but are dependent on the
business model. After the viability of the business model, how it will be promoted is
arguably the most important aspect for a start-up. For most companies a critical volume of
loyal, returning and revenue-generating users of a service is required to repay the investment
in these companies. Promotion from zero base is difficult and costly if there is a need to

reach a wide audience. An important decision is the investment in promotion and how it is
split between online and offline techniques. Perhaps surprisingly, to reach the mass market,
traditional advertising was required to get the message about the service across clearly to the
numbers required. For example, Boo had major TV and newspaper campaigns which gener-
ated awareness and visits, but didn’t translate to sufficient initial or repeat transactions.
Some of the other start-up companies such as lastminute.com and Zopa.com have been able
to grow without the initial investment in advertising. These have grown more organically,
helped by favourable word of mouth and mentions in newspaper features supported by
some traditional advertising. Promotion for all these companies seems to indicate that the
Internet medium is simply adding an additional dimension to the communications mix and
that traditional advertising is still required.

5 Financing
This describes the ability of the company to attract venture capital or other funding to help
execute the idea. It is particularly important given the cost of promoting these new concepts.