How To Compare Product Ideas

I am faced with the task to evaluate between several strongly competing product ideas in Web 2.0 space. It is not an easy task to evaluate strong competing ideas, each with a reasonable business model, in this space because of unpredictability of the market. So I asked this question to my highly experienced peers in my LinkedIn Network. I received excellent ideas and suggestions from the group. Here are the full details:

My question was:

I am looking at few strong competing product ideas for our next product. The factors I am already looking into are:
1. Expected short term and long term business potential
2. Competitor products, their market and platform valuations
3. Barrier to entry for new competition
4. Key applications where this platform can be applicable

The IP is probably not defendable but I will anyway check with my lawyers.

I am having a hard time evaluating proper business potential of an idea in Web 2.0 space.

How would you generally compare ad based revenue model with subscription based web service model?

Does that look familiar? Read on…

Christopher Banas, VP Corporate Development at McGuinness & Company said:

If as you say you probably don’t have defendable IP then there are several items that are key to consider.
What are the direct and indirect costs of getting to market?
Will it be so popular that competitors will jump in immediately?
Will it pay off before competition floods the market?
What are the clear advantages of a Web 2.0 platform?

The above questions tie into your decision for ad based revenue verses subscription based. If you are expecting competition then whatever you can do to capture as much of the market as possible in the shortest amount of time is your best bet. Long term sustainability will depend on your product being the name that comes to mind when ever someone is looking for that type of service.

Just a few more quick thoughts. The advertising route for fee generation would probably have a lower initial cost and maybe a higher number of initial participants. How long can you/partners/investors go without a substantial return? Is the service/product scale able? My thoughts would be a tiered service much like Eudora’s email program. Free mode, sponsored mode (ad based), paid mode.

Robert Hacker, Investment banking- financial consulting for FL-based/ Caribbean/Central American early stage/ middle market companies said:

First, I would add legal/regulatory issues to your list if you have user generated content.
To evaluate the ad revenue models this post by Will Price at Hummer Winblad might help (https://willprice.blogspot.com/2007/04/value-of-scenario-planning.html). On the subscription model I would do sensitivity analysis based on customer acquisition cost. Looking at the sensitivities of both models and expected IRRs might give you some real insight into which way to go.

Roger Nolan, High Tech Strategy, Alliances, Marketing, M&A said:

If, as you say, the IP is not defend-able, then would look at two thing in particular.
1. What differentiates you from your competition today?
2. How will you evolve your offering so that you maintain a competitive differentiation?

Then, you can look at ad revenue versus subscription model. The key question there is: will your target audience pay for what you have to offer and how much? …and will they be willing to pay longer term? If it turns out they aren’t willing to pay or to pay what you want, that you will have a good indication of where to look.

Akira Hirai, Business Planner & Entrepreneur Coach said:

Your best bet, in my opinion, is to cheaply implement and release free beta versions of all of your product ideas, and let the user community decide which one(s) you want to devote further resources to. Don’t let the revenue model slow you down - you can resolve this once you have a user community. Don’t waste your time on trying to do a lot of quantitative analysis before you launch, since this is at best a guessing game prior to launch. Just focus your resources on creating something of use to users, and get validation of your concept from the market - almost everything else (apart from IP issues, in certain circumstances) - is putting the cart before the horse.

I am very thankful to all of them for their kind help.

Looking forward to your ideas too… You can also participate on LinkedIn.