Next Generation of Cloud Business Models

I spent an hour tonight conversing with a European gentleman about what is happening in the market with relation to community based start ups, such as Groupon, and how their growth has obliterated all previous benchmarks. For those of you that do not know Groupon, it is a ‘daily deal’ service that offers it’s members discounted bargains. Members buy into the service and if enough members commit to the deal the transaction is on. For the vendors that take part in the scheme Groupon is not a long term sales channel, but rather a marketing spend. Vendors want a population to sample their product at a massive discount and then rave about the service to their friends. Other similar communities include Scoutmob, DealOn, DailyDealster, Living Social, Mamapedia Sweet Deals, Half of Depot, DealSwarm, Kudzu, SparkSpree, TIPPR, KGB Deals, Eversave, BoomStreet, etc.

In the case of Groupon the business model is very clear. Groupon takes a cut of all the transactions. Facebook was recently valued at $50 billion and their revenue model is a little more obscure. Facebook makes a large chunk of its money from ad sales and the rest comes from it’s deal with Microsoft and virtual goods sales. Very different means of generating revenue, but in both cases the underlying value of the companies derives from their member base and the revenue potential that those members represent.

Social aggregation is a byproduct of the explosive spread of social networks. Consumers need an application that will parse together status updates and feeds from Twitter, Facebook, LinkedIn, FourSquare, etc. HootSuite and Seesmic are just two examples of such services. The same is happening with ‘daily deal’ communities. is a service that aggregates all the available daily deal services into a single list. A couple of years ago I consulted a startup called Twid, which was a brand aggregator. Consumers could interact with multiple brands through a single service. If only some one could create an aggregator that would aggregate all the aggregators.

Etsy is another phenomena. Etsy is a niche communal e-commerce portal for artisans. Etsy offers a more optimized outlet for hand crafts than a generic eBay and/or Amazon would. I recently consulted a web analytics company with growth aspirations. The problem is that the web analytics space is already dominated by Omniture, Webtrends and Coremetrics. My advise was to think about going communal by using the web analytics solution as a platform for niche ecommerce portals, which would serve as references and a funnel feeder for the solution itself.

Another phenomena are the penny auction sites, which serve to off load excess stock. The recent depression and loss of consumption have fueled a surge in penny auction sites. Also the number of fraud complaints has shot through the roof, which I believe has prevented the industry from gaining momentum in the same way as the daily deal industry. If the deal seems to outrageously good to be true, then it probably is., and are examples of penny auctions.

These are all communal business models that have sprung up in the last three years. If you have seen Eric Qualman’s Social Media Revolution clip on Youtube, just imagine what the video would look like with Groupon stats. We will see a surge in business models in just the next 12 months that we cannot even dream off today. The bottle neck in this explosive trend is not technology scalability, but rather how to hit 100+ countries across the globe in the first year. Regulatory compliance issues, staffing, etc. managing growth in general on an unprecedented scale.

Cloud computing enables scalability and deployment of these services, but I believe that really cool concepts will use the cloud to deliver mashups of vast quantities of user generated data… location based, real time, etc. Information is the ultimate consumable and an inexhaustible resource. Cloud vendors need to facilitate the integration of datasets better than they do today. Microsoft’s Code Name Dallas is an online ecommerce site for buying and selling data. It is a good start, but really should be positioned as the beating heart of the Azure cloud. In a recent research project I interviewed Azure ISVs and majority did not understand the business model potential seeing the cloud as merely virtual hosting. We also need a cloud app ecommerce portal, which I will call Code Name Atlanta. Lastly we need the Azure equivalent of the Google App Inventor that can tap into data from Dallas and sell the final product (for varying form factors) on Atlanta.


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