Why You Can Sometimes Wait For Scale To Execute Your Business Model
I wrote a long post on the plane back from Australia trying to defend my assertion that for most web apps you can wait for scale to execute your business model. After reading it several times, I think it sounds too defensive and I am not going to post it. But there is one part of the post that I like and want to share with all of you. There’s something unique to most web apps that makes waiting possible and it’s this:
if you are building a media oriented business, particularly one that has low marginal costs, meaning you build it once and the cost to serve an additional customer is negligible, then you have the unique opportunity to focus first and foremost on building your customer base or audience
Most web apps will be monetized with some kind of media model. Don’t think banner ads when I say that. Think of all the various ways that an audience that is paying attention to your service can be paid for by companies and people who want some of that attention.
If the marginal cost to service an additional customer is negligible, then you can wait to monetize. If it’s not, then you are going to have to focus on your business model earlier in the life of your business. It’s really that simple.