Develop reliable online business profit model

The rise of mobile internet has brought about the explosive development of the "online-to-offline" (or O2O) business, especially through application platforms popular with internet users. But in terms of either "traffic flow", or "home delivery" and take-out services, the O2O model is still in the money-burning stage without generating profits. Still, enterprises are making huge investments, resulting in fierce and even brutal competition among them because they believe the vast online domestic market holds great potential for generating profits. For example, Jingdong, Jumei and LeTV have invested heavily to upgrade their software and hardware, by either buying copyrights or signing contracts with celebrities.

Such financing initiatives and the expected drastic rise in their market value have increased these online enterprises development potential. Bubbles, if there are any, are sure to burst one day, but every enterprise involved hopes to make enough gains before that day.

The government's support to start-ups and for innovation has encouraged many to set up their own businesses. But some enterprises have gone bankrupt. New enterprises were set up, especially in the O2O sector, almost every day in the past year, though.

The blind use of subsidies to attract customers could spell doom for an enterprise if it fails to continuously gain capital financing. In this era of turbulent capital, the so-called chilly winter for the internet sector seems a matter of time. The bankruptcy of some old mobile phone manufacturers, communication and home furniture enterprises, and O2O platforms in 2015 is a vivid reminder of the reality.

Many newly established online companies could get trapped in a vicious "money-burning" circle if they excessively depend on the capital market while failing to develop a manageable profit model. For any enterprise that fails to develop attractive products and a reliable profit model, the exit of capital is inevitable.

True, burning money does not necessarily mean creation of bubbles for internet enterprises. But to excessively cater to the capital market while failing to raise the quality of products does mean a shortsighted behavior that will inevitably be rejected by the capital market.

The author is a Beijing-based We Media writer.