A business model like the following has been busted (especially if you want to raise VC funding):

• have a great idea
• build a nice demo, alpha version of your idea
• raise a ton of money
• get millions of users (after a couple of years)
• throw advertising around to attempt to make tons of money

However, there are tons of  business models out there.  Here are some of them:

• Freeminum – give away most of your service for free.   Charge for a few premium features.  Example: Craigslist(charge only for job posting), TaoBao(no listing/transaction fee, sellers can pay for additional services/promotion), iPhone apps, Flickr
  
• The “Woot” model with Guerrilla marketing- one kind of product  per day, limited supply.  Bag of craps. example: Woot
• “Pay what you think it’s worth” – let customers decide how much your service is worth.  Not many people/companies have been brave enough to embrace this business model.  It’s quite popular in open source software offering(you can call it “donation” as well).  Modrails currently offers Phusion Passenger Enterprise via this way.
• Open source software model: give software away for free. Charge for certification, support and service subscription
• “Pay as you go” utility model – charge customers by their usages.  They don’t need to pay when they don’t actually use your service.  Example:  Amazon Web Service
• Monthly Subscription – you charge a monthly fee for different level of services or supports.  Example: SalesForce, NetFlix
• Middle Man/Broker – You act as a middle man to facilitate a transaction between a supplier and a demand.  You take a percentage cut of a completed transaction.  Example: Google AdSenses, affiliate marketing in general
• Money printing machine – this is a dream for everyone.  eg: Google Adwords where advertisers pay for clicks/impressions/actions
• Learn from gaming industry where gamers have been willing to spend money – 29 business models for games

Other resources:

• In a battered economy, free goods and services online are more attractive than ever. So how can the suppliers make a business model out of nothing?  Wall Street Journal talks about the Economics of Giving It Away
• is the free ride for web startups is over?

Whatever business model you come up, you really need to provide values to users and work on stuff that matters.

• shop in store, use the phone camera to take a picture of of a product’s barcode, get back real-time pricing info
• type in the product you want, have the application search for the products close by your location, and then directly go to the store and buy

This all sounds very cool.  But where can you get real-time product pricing and inventory information?  You don’t want to mislead users to a store that doesn’t have the product in stock or has the incorrect price
Good luck in asking all the big retailers to give you real-time pricing and inventory info.  If you don’t have a significant amount of users, they don’t care (unless you won some developer contests like ShopSavvy).   But if you don’t get this kind of info, you won’t be able to attract users.   A typical chicken and egg problem.

Well, I went to the landing your first customer SVASE event and learned from Scott Dunlop from NearbyNow how he successfully solved the chicken and egg problem of attracting users and retailers back in the days(even before all the GPS-enabled phones came out).

Scott talked about how his wife loves to shop at mall and how he hated spending hours at mall.   He wanted to build an application that helps mall shoppers to quickly locate the products they want.  The way he did the user research was just plain simple but effective:  buy some pizza, give them out for free in mall during lunch time in exchange of people telling him what they want in their mall shopping experience and their pain points.

Thinking all along of how to get the real-time pricing and inventory info, one day he found the mall operator sign, he realized that retailers in mall have strong relationship with mall operators.  And there are only few mall operators in the US.

Through his well-connected friends(Scott has a good track record in building successful companies), he pitched to the mall operators to build a mall directory mobile application that a user can easily use to navigate the mall and locate products they are looking for.  Every retailer wants to be on that directory because no retailer wants only its competitors to be seen by customers.  They are also willing to provide real-time data to drive customers into their stores.  Therefore, mall operators are the catalysis to help NearbyNow acquiring retailers as customers.

Users can use NearbyNow to search for product pricing and availability within their area, reserve the products(store associates will be notified and get the products ready), and go to stores to try them out.

NearbyNow works particular well with products that users want to try out in person(clothes, shoes, jewelry) and that are very hot selling and with limited stocks(wii)

The real nice thing about NearbyNow is it bridges online and offline shopping(online->mobile->location) as it can drive and track online leads that turn to offline leads and sales.

Its business model:

• cost per customer driven to a store
• sponsored listing of products from retailers in the mall where the user is currently at

Since NearbyNow gets the real-time data which no one else has(eg: shopping.com), it’s another gold-mine that it can easily monetize(eg: build a API for accessing the info.  Tons of mobile applications would love to access).  In fact, thefind partners with NearbyNow to offer product reservation in local stores.

After reading the NearbyNow story, have you be inspired to find any catalysis to solve your chicken and egg problem?