Recently I read an
article about how it is difficult to design a business model around mashups. In the world of mashups there are API providers, mashup developers, mashup enablers and consumers (see
link). Let us look at this closely. A business model has four components: value proposition, marketplace offering, defendable resource system, and a revenue model.
A value proposition includes a target segment of consumers, focal benefit and a rationale for superior delivery. This is a requirement for any business, whether created by a mashup or otherwise. From a marketplace offering perspective, a mashup provides a service or just information. A resource system must include partners offering services such as API providers, and enablers on which a mashup is built. Included in the resource system should be a core benefit that the mashup creator must provide. This core benefit could be some processing logic or business logic that the developers has developed on their own. For a revenue model, the developer could simple run ads on the site and survive through ad revenue or sponsored ads. The other option is to create a revenue sharing model with API providers. In the case of ebay motors, ebay could share a piece of the transaction revenue with the mashup developer based on the traffic that ebay motors direct their way. Finally, developers could provide some basic service for free and charge for premium services. The big risk is that the API providers may decide to charge more or even abandon a service. This is common even for software product development where an application provider or a middleware provider could do the same thing. In such instances, the API developer loses credibility if they change business model abruptly. Even if they do so, module/product developers could switch to other service providers. At a basic level, a mashup developer could be a system integrator that develops products using pre-existing products. In a more advanced setting, the mashup developer could be using APIs to develop new products by adding new functionality, logic and data to the basic building blocks.