Building blocks

Chris Kerwin, co-founder of digital commercial strategy firm Can-did, looks at how growing businesses can maximise online revenues.

Chris Kerwin, co-founder of digital commercial strategy firm Can-did

Chris Kerwin, co-founder of digital commercial strategy firm Can-did

For the vast majority of companies looking to develop online revenue, gone are the days of the easy buck. Yes, we are still seeing relative upstarts with emergent business models being snapped up for huge amounts (think Facebook’s recent $1 billion purchase of Instagram), but for most, generating meaningful revenue from digital properties is grueling work.

Although it’s never going to be a walk in the park, there are five basic building blocks that can help generate success in the online world.

The first step sounds pretty obvious, but a plan is needed. To do that, businesses need to answer some questions, which might seem fairly basic, but will form the basis of success. What is the website/mobile application aiming to do? What is it for? How does it differ from competitors (if it does)? Who is going to use it? Why? How often? In what numbers? How will it make money?  

In effect, these questions will help start to define a digital commercial strategy.    

Defining the core revenue generating activity of a business is the most important question to ask. As a rule of thumb, online businesses do one of three things to drive revenue. They either sell things (e-commerce); sell access to an audience (advertising) or charge for content or services (subscriptions or micropayments).  

It might sound a simple question to answer, but even some of the biggest players struggle to define a core business model. News International’s attempts to charge for content on some of its websites (e.g. The Times Online), but sell advertising on others (e.g. The Sun Online) is an indicator of how fundamental this question can be, even for huge brands.

Being clear about core revenue drivers does not preclude a website or mobile property from driving revenue from other areas, indeed most successful digital businesses now have multiple revenue streams. But it does help to clarify other business drivers which will be essential to success. Put simply, knowing how a business intends to generate money enables it to understand and forecast what its revenue might be.  

Forecasting revenue is the next essential step to success, helping drive a number of other core decisions, such as what cost base a business can handle, what user base it requires to be successful and what timeframes you need to consider to meet goals.

Working out how many users a business needs to get to its website, and what it requires them to do, is an important step. For example, as with one of our clients, if you know that the main aim of a website is to help people find and book their wedding venue, and the business model relies on charging venues to be listed on your website, then it demands a critical mass of users coming to the site to make it valuable to venues.  

Not everyone who comes to that site will want to book a venue, not everyone who wants to find a venue will find what they are looking for and not all of them will submit an enquiry to a venue (or convert). On the plus side some will send enquires to more than one venue. Some will come back regularly, others never. Some will tell their friends, others will decide to go to venues directly. What this type of thinking helps to do is understand how big an audience needs to be to allow the revenue generation needed to build a profitable business. This same thinking can be applied to e-commerce or subscription led models.

The next key step is to work out how a company is going to get those users to visit a website or mobile application. One thing that’s for certain is that they won’t just turn up. There are many ways that one can build a user base (SEO, SEM, competitions, advertising to name a few), but all of them are going to take effort and /or money. Building and launching a brilliant proposition into the market does not guarantee an audience. Sure, a small few get lucky and have overnight word-of-mouth success, but 99.9 per cent do not. Not having a plan to generate users will only mean one thing - that a business won’t have any users.

The final point is another simple one. It’s important to not forget that continually reviewing, adapting and enhancing a plan in the real world is what makes the difference between a good plan and a successful business. All the planning in the world is no substitute for trying things out, seeing whether they work and building experience on the road to success.