economics

Hal Varian, the chief economist of Google and co-author of the seminal book “Information Rules” just publishes an article on the changing economics of newspapers. The paper and his blog post is worthwhile reading.

The articles goes well along my analysis of the newspaper market, where I argue that just a transfer of the paper business model to the Internet does not work since the business model of traditional papers is unbundled by the Internet. A newspaper is three businesses (content, advertising (selling of readers’ attention) and classifieds (bringing demand and supply together) bundled together by paper. And on the Internet, the glue of paper does not exists any more. So the revenue model of newspapers will not work on the Internet.

In the discussion on business model innovation the focus is often on the innovations regarding the value proposition or on the value architecture but it is interesting to look at the revenue model as well for starting points for an innovation.

Anders Sundelin in a recent blog post reflected on net working capital and the influence of the business model on it. I can only recommend his post to anyone. He shows how this important financial figure (net working capital) is influenced by the business model. Actually, almost all innovation in the retail industry change the economics of the industry. They all start by minimizing the working capital needed in the operation. Since the traditional business model in retailing is very capital intensive due to inventory, all disruptive innovations help to reduce the capital tied to inventory. And interestingly, at the same time as the working capital is decreased or in same cases, it even becomes negative the margins on sales go down.

Tag: economics

Newspapers Economics and the need for new business models

Changing financials, changing economics, retailing and business model innovations