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The Internet, a technology innovation, enabled an initial set of business with new business models tackling problems customers faced before the Internet was created.

Some of these businesses failed, others succeeded. Kosmo is the quintessential example of a failed Internet business model. Attempting to leverage the always on nature of the internet and the ability to quickly aggregate demand and dispatch couriers to delivery goods, Kosmo’s revenue model proved too unprofitable to sustain.

Amazon leveraged some similar principles to aggregate demand and revolutionize the way electronics and books were sold. The key difference between these two businesses was the buffer in the delivery time customers expected and of course payment for transport!

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Second generation of business models arise from new needs

Improvements in technology that delivered the Internet to the home including the network delivering bandwidth, the home PC, and digital cameras enabled additional businesses to grow.

Photo and video sharing sites sprung up with new models to store, backup and produce photos and videos. SmugMug, Ofoto and SnapFish built businesses on digital images that users uploaded through new found wide pipes.

Hulu is now streaming high definition video, selling advertising at similar rates to television rates, enabled by broadband, better video cards and high resolution monitors.

Age of data – business models on user/content and user/user interactions

As users began to use the Internet more, they produced terabytes and terabytes of data of user behavior. Suddenly, a new business model was born: data analysis, packaging and reselling. Not only did the internet drive first order drive business model innovations, but it drove second order business model innovations that could not have existed prior.

Billions of dollars of advertising inventory are bought and sold annually on ad networks like Google or exchanges like RightMedia, heretofore nonexistent. Today, 250M have user profiles on Facebook, most tied to true identity. Chjaracterizing those interactions of those users on the web will soon be an enormous business for a variety of advertising purposes.

Everything old is new again

As I’m watching, this is all happening in mobile very quickly. The smart phone race is on triggered in no small way with the iPhone. Smartphones take advantage of higher bandwidth, integrated cameras, and all the previous businesses we’ve built on the web, including e-commerce businesses, photo and video sharing and social networking, not to mention advertising.

Technology innovation breeds business model which breeds further business models

In the end, it reminds me of Newton. Entrepreneurs today can proclaim

If I have seen farther, it is by standing on the shoulders of giants.

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