I’m almost done with the next chapter of the ebook. Need to do one more revision and then I’ll post it up here. Been a little bogged down with work, so my apologies if the blog is looking a little stale of late.
The following is going to be part of a mini downloadable booklet that I’m planning on releasing on this site – as soon as I can finish it. I have a few chapters written already, and a rough outline of the rest. Stay tuned here over the next few months for more sample chapters. Comments will be very useful for me as I revise this.
Addressability – and why it matters to you
Imagine you are living in the early 1700s. You’re living at Fort York, in Upper Canada (later to become Toronto, Ontario). You need (I know its a contrived example, but bear with me) to get somebody living in China to move a precious porcelain vase 6 inches to the right on the pedestal on which it is standing. In turn, they need to you take off that ridiculous beaver-skin hat, and hang it up by the door.
So how would you go about doing this?
I assume that – even in the pre-mass communication age, something akin to the concept of six degrees of separation must apply. The number is likely higher though.
So you pass the message along to your friend, who knows a ship’s captain who is travelling to China, who in turn knows a merchant in the port area of Hong Kong – you get the picture. Eventually, probably several years later, the message is handed to the person you had in mind, who moves the vase. Two or three years after that, you receive the message back about your hat.
The idea that I’m trying to convey, is that most of the objects in the world have a defined way in which you – no matter where you are – can reach out and touch them. This concept is called addressability, and it isn’t new.
A large part of the history of technology over the past few hundred years essentially boils down to finding better ways to send a “message” to somebody or something – to have ways in which there is a defined address for the information that you are sending.
1. When the Royal Mail started operating in the UK in the 1800s, people typically didn’t have well defined mailing addresses. Yes, you could probably get a letter to them based on their name, the city in which they lived, and possibly their neighbourhood. Beyond that, a courier potentially had some guesswork to do in order to hand a letter to its intended recipient. The assignment of street names and numbers, along with the invention of postal (or ZIP) codes, are all ways of attempting to formalize how to reach somebody.
2. The telegraph, and later the telephone, are both methods by which information (either a written note or a verbal conversation) can be delivered directly to a person. Hence telephone numbers, area codes, international dialing codes and the like.
3. The internet relies heavily on a concept called an IP Address, which assigns a unique number either to a computer, or to a part of the network in the close neighbourhood of the computer. This allows traffic – such as email – to get to its intended destination.
Why Does All This Matter?
You’re probably already thinking something along the lines of “this is all very interesting, but how does it matter to me?”.
My best guess is that the process of making everything and everyone in the world addressable is going to accelerate in the near future, with some interesting effects. There will be a number of business opportunities that open up as a result, along with privacy and security issues (which can also be business opportunities for some people!).
There are two areas in which this is going to happen:
a) Firstly, addresses are going to become more “fine grained”. This means that instead of (for example) a computer having an IP Address, each part in the computer may have an IP Address. Your clothing may have IP Addresses (if you purchase something with a RFID tag, it may already have one!), your car will have an IP Address – not just that, but every part in your car may have its own IP Address.
b) Secondly, there will be an increasing effort to solidify and catalogue all of the massive amounts of information that result from everything having an address. This means finding ways to reach somebody or something without having to know too much information about.
The result of all of the above, is that there are dozens of categories of businesses that are going to become feasible in the next ten years. I’ll list a number of them below. Some of these businesses already exist to a certain extent, but they’re going to become actual specializations and business plans, rather than occasional services that are offered.
The following categories of businesses are likely to become viable in the near future:
1. Help, I’m out of addresses!
Currently, most of the world operates on an internet addressing system called IPv4. You’ve probably seen IP Addresses in this format; they look something like 192.168.0.1. Four digits, ranging in size from zero up to 255, separated by a period. The big problem is that even with the relatively small number of objects (usually computers or computing equipment these days), we’re already running out of addresses in this format. This is why there is an effort underway to switch the entire world over to a new addressing system called IPv6, which has a truly gigantic number of potential addresses. This process is proving to be extremely difficult to complete, leading some industry specialists to conclude that the world is going to run out of existing addresses first; only after the inevitable emergency will everybody switch.
The business opportunity? Start a company that specializes in finding places where equipment isn’t IPv6 compatible, and consulting with companies on the appropriate way to make the switch. There are already networking specialists who do consulting in this area. Look for this to become an actual business by itself – at least until the whole world switches. Its an opportunity similar to the Y2K bug, where a little bit of FUD and some technical know-how lead to many people making big money.
2. Help, I need an address!
The process of assigning addresses to physical objects that aren’t computers or networking equipment, is already well under way. The biggest push has been by companies like Walmart to have all of the items that they sell tagged with an RFID tag, which allows them to track what they sell with great precision. RFID tags allow each item to have a unique ID number associated with it, which – combined with a database of the items – allows somebody with a scanner to discover information such as price or inventory levels about the item.
What RFID does not do – yet – is allow each of those items to be directly connected into the internet. The concept that your fridge or toaster will be network accessible has been promised by futurists for years, but hasn’t really progressed much outside of the lab. Yes, you can purchase a coffee machine with a network jack off the web right now, but most people don’t. Yet.
When you factor in the growing adoption of technologies like wireless internet, along with a gradual reduction in the amount of power required to actually run all the “fancy stuff” needed to connect, eventually not just appliances but also things like clothing, or auto parts are each going to be able to connect to the internet.
This raises a number of privacy and security issues, along with business opportunties such as creating the addressed items in the first place.
Some possible business models that result:
a) Manufacturing new kinds of RFID tags that can be incorporated into objects, which provide not just an ID number, but also an internet connection. A further business model: create the platform and standards by which all manufacturers of these tags operate. That means the underlying software, how the hardware interfaces with the part that it is embedded in, etc.
b) Inventing underlying technologies to reduce the size and power requirements of the above tags.
c) Creating ways for parts to let the manufacturer know when they are broken; this model already is underway with printers – many new printers will email the manufacturer and the servicing agent to let them know when the toner is getting low, or when there is something the matter.
d) Brokerages and middleman services for part c) – imagine a website that printer servicing people can be members of, which will automatically list all of the printers in their area that are low on toner, and then allow them to bid on the job.
e) Security and privacy services: locating and removing tags from sensitive equipment; “firewalls” for objects – for example a way to allow you to access anything in your house, but prevent anyone else from doing so. Its an interesting world we live in when we need Object Firewalls, not just network ones.
f) Quality control – during the manufacturing process, each and every part can be separately quality controlled, and a record attached; then, during assembly, an automatic record for the entire complex object (i.e. a car) can be created on the fly. There’s room for software and equipment manufacturers to build systems that assembly lines can use to do this.
3. Help, I can’t find something! (Or I can and I don’t want to!)
If all of the quadrillions of objects in the world have a unique address, and a way to reach them via the internet, we’re going to have to find new ways to sort through that data. There are a great many business opportunities that arise from this, including:
a) A new kind of catalogue – grouping items (your car, your shirt, your cell phone) based on who owns them, who is allowed to use them, who can see that they exist. This would be a golden opportunity for an existing search engine company to get a leg up on their competition. I suspect that there’s only room for one viable business in this sector. If you were to login and authenticate yourself, you would be able to see all of the items that you have permission to access from a single control panel – you can turn on your oven and send an SMS to your wife that dinner is cooking at the same time.
b) Some items should be publically accessible – for instance things like traffic cameras etc. Cataloguing such items – along with more detailed security functions such as who can view, who can modify settings – will also be a big part of item a).
c) I can forsee a business opportunity where a consultant helps people find things – either a specific item, or a category of item – based on such catalogues. This is like an Object Librarian job, combined with that of a Private Detective. Instead of sorting and cataloging books, they would do the same thing with objects.
d) Single point of access. Currently, I can be reached via about half a dozen email addresses, three or four phone numbers, two Instant Messaging addresses, and about fifty to one hundred social networking website profiles. If somebody can figure out a single way that I can be reached – anywhere in the world – through a single device, it would greatly simplify my life. We’re already seeing some convergence in this area. My cell phone also can access email, in addition to being an SMS device. What I’m getting at though would be a device (probably combined with a proliferation of standards and platforms) where all messages – voice, text, video – are transparently routed to me, no matter where in the world I am. We’re getting there, but there are still opportunities for software developers and hardware manufacturers.
e) Reputation management – to some extent, this already exists as a service that some Search Engine Optimization specialists offer to customers. The specific case in mind is one where negative information about a person or company has found its way onto search engine results, or internet archives. It doesn’t necessarily have to be negative: for instance some States in the US have been digitizing property records without removing sensitive information such as Social Insurance Numbers. The process of removing information from the internet once it exists is extremely tricky; not only are there many places that can cross-reference information, but there are also many places that tend to cache information long after it is gone from the original sources. The process of removing information actually usually involves creating vast amounts of counter-information or meaningless nonsense that makes it difficult to actually obtain useful results from a search. Expect this to become a viable business model in coming years.
In the article above, I listed about a dozen possible business models that somebody could make money from based on the notion that more and more objects in the world are going to be directly linked to the internet. Yes, there are all kinds of security and privacy issues, in addition to which there are probably entire industries that are going to vanish as a result of this happening. There are also a great many opportunities for new industries to arise though.
The Wall Street Journal issued an interesting article today on a topic that I’ve been pontificating about (here and on Yahoo Answers) for a while now: how are businesses going to switch from mindlessly burning up investors money to actually making money?
Last week I wrote about the 4 categories of business model that exist online. I’d like to take a quick look at a few of the successful (and not yet successful) examples (some from the WSJ’s article and its comments), and see if I can come up with a few specific ways in which websites can compete with “free”.
The issue at hand is fairly simple to describe: in each niche market online, there are many, many competitors. Most of them are giving away their services entirely for free. Some of them charge for specific premium services, but users are often willing to shop around to find some set of useful (to them) services that don’t cost them anything at all. This tends to result in a race to the bottom, where the only way (and it is indeed a dubious way) to make money for a website is through advertising.
Let’s look at a few of the most successful online businesses and see if we can learn anything from them:
Google’s success is based on being able to deliver the largest number of ads, to the largest number of placements, at (in general) the lowest price. This business model depends entirely on having extremely high traffic, a highly viral method for spreading their system around, and excellent system for placing the right ad on the right website (it ain’t perfect, but it is good enough), and constantly doing interesting (but usually non-profitable) things to attract even more attention. At this point in time, it would be virtually impossible for anybody to launch a competing bid for that ad space – in order to do so, they would need to be able to charge advertisers less, while paying website owners more, which would likely make their margins uncompetitive. Google’s model – essentially a middleman model – has a large “moat” to use Warren Buffett’s terminology. Yes, they’re going to take a hit with cost per click going down a bit, but they have enough critical mass to ride out the storm and fend off competitors at the same time.
Craigslist is also a high traffic-dependant model. Basically it is a twist on the “freemium” business model – almost everything is free, except for a few types of ads in specific markets. As far as I can tell, they were the first ones to cotton onto the idea of giving away virtually everything, making yourself completely indispensible, and then charging for a few specific features that are very worthwhile for a small set of people to pay for. There are a great many competing websites – some who actually have quite a bit of traffic – that are giving away for free the specific set of things that Craigslist charges people for. However, they have sufficient traffic to make it worthwhile for advertisers to pay for things that need to attract attention. Basically their model boils down to being sufficiently indispensible that people will pay.
A former employee of mine first alerted me to this website. When they started out, they offered a completely free service for people to organize groups to “meetup”. Their traffic grew exponentially until several years after launching, they switched to a fee-based model. Users of the site get in free. Owners of groups pay a monthly fee. When they switched, they lost about 80% of their groups. The ones that remained provided enough revenue to keep things profitable. Their methodology: lock-in. One people have a successful group with a large member-base, moving it somewhere else – even though feasible – is a pain in the neck. The amount that they charge isn’t high enough to drive away their customer base, although I have my doubts as to whether they’ll be able to grow much further. Basically they’re now a cash cow.
Salesforce.com gets away with charging a fee for an essentially simple system (there are lots of CRM packages around, some of them free) by providing a high-end feature set, in addition to a lower startup cost. Its easy to get going with Salesforce – you pay per seat, so the initial cost isn’t all that high, it is more convenient than installing and maintaining a system on your own, and then you are locked into a system as you grow to have more seats (which is where they really make their money). With a paid userbase that is apparently around 50,000 customers, they’ve probably grown to as large as their market will bear. Their key strategy: provide lots of features that aren’t available in the free/cheaper competitors; make the initial costs so low that they are painless; tie users in so that it is hard to leave; gradually ramp up the fees. This is essentially a “utility” model. Anyone hoping to compete with them is going to have to provide more features at a lower cost (and hence lower margins).
Wikipedia has a much lower operating cost than a traditional encyclopedia: their content is basically free, they have things set up to run on a surprisingly small number of servers, the crowd-sourcing model of producing quality (mostly) lends itself to a large amount of useful and accurate content, and people are willing to donate to keep something so useful alive. Like many of the other examples above, this is a business model that relies on being the highest trafficked website in its niche – and it is viral in the sense that the more content it has, the more useful it becomes. By keeping costs down, and basically guilt-tripping a subset of users into donating money, they can make a profit and keep things free. I’m not quite certain how Brittanica hopes to compete with them – yes, Wiki often has high-publicity editing faux-paux, but for the most part they are good enough. I’m not sure that providing a higher quality service (but charging for it) will be sufficient reason for people to switch to a different service.
I think that by now we can see a few specific trends:
- Be the first one in your niche
- Have the largest amount of traffic
- Provide a service that is good enough
- Make it difficult to switch
- Make it expensive to start a competing business
- Be willing to start charging and lose some traffic as a result
- Charge only for those things that you need to charge for; keep most things free
- Keep costs down
This isn’t all that different from any “brick and mortar” business model, is it?
Let’s take a look at a current favourite (of mine and many other people!): Twitter. What possible ways can they achieve their revenue goals, given that a) it isn’t necessary to login to their site in order to use it, and b) they provide a very small number of features, all of which are simple and easy to duplicate.
Their options (as I see it) are as follows:
- Make it harder to access Twitter from elsewhere. Start charging to use the API. Lock it down with additional security features.
- Place advertising on their site. This would rely on a larger percentage of users being forced to actually login to Twitter, as opposed to using tools like ping.fm.
- Create additional features that are currently being served up by other websites in their “ecosystem” – all of the cool profile rating, desktop tool, website plugin, karma-inducing stuff. Yes, I know, they would irk a lot of people.
- Sell products or services: branded versions of Twitter that are specifically for a particular company (i.e. for sales reps and customer service people, or for staff to tap into other staff’s knowledge). Services specifically for brands trying to tap into Twitter’s user base.
- Create their own desktop tool, with advertising spaces on it.
- Buy other websites with related features and tie them in.
- Find some other product or service (My husband/wife/parents went on a Twitter vacation and all he got me was this lousy t-shirt) that they can sell. Hey check it out: the Twitter eBay account! I don’t know if that would work.
In all of the above cases, they would certainly lose a percentage of their users. I think that is why they’ve been holding off for as long as possible – once they are “big enough” they can set things in stone. They’ll lose some people, and the rest will stay, but it will be hard for them to grow afterwards. I’m also not sure whether or not they would be successful or not with this approach – users could potentially just gravitate to other similar sites. The point is that they do have options, even if they are going to be hard ones.
There are plenty of lessons to be learned from a recession like we’re currently in. I tend to view these times as performing a tough but useful purpose – like controlled fires in a managed forest. Nobody really likes having to deal with reduced source of income (never mind venture capital), but this is an excellent opportunity for businesses to fine-tune their business models so that they can be more profitable once the recession is over. If website owners can move away from “everything is free and I make money from ads” to “I have some set of products and services that I sell, and I also make some money on the side from ads”, the online economy is going to be stronger going forward.
The key to cutting business operating costs during a recession is to avoid cutting in places that will be counter-productive in the long run.
I’ve seen a number of articles lately that show ways that people can cut some costs in their personal expenses in order to save money. Things like making coffee at home and skipping the latte (not so good if you are a Starbucks shareholder).
Most of the lists I saw had little or no bearing on businesses, particularly small businesses. I’d like to make up for it with the following list of ways that businesses can trim some “fat” during recessionary times.
Marketing and Advertising
Traditionally, when times are rough, businesses cut their advertising costs first. This can be somewhat counter-productive, because advertising is one of the ways that you can get new business. The trick here is to work on ways to get more for your money, or to only use the advertising that you really need.
- Google Adwords – I’ve heard that there has been a drop-off in the cost per click for Adwords lately. If you rely on Adwords to drive business to your website, consider adjusting your price per click downwards. Do you absolutely have to be the first one on the list? Sometimes the second or third listing gets more clicks, and costs less. That said, Adwords is still the most targeted form of advertising that is available to most businesses.
- Directories – Some businesses rely heavily on advertising in phone directories (“yellow pages” or “white page”) for their customers. Those businesses have more bargaining room than usual when it comes to renewing their ads. Consider going with less / smaller ads, or making your colour ad into a black and white one.
- The price per square foot for rent is down in most cities in North America. If your rent is up for renewal, see if you can get your landlord to reduce their rates. Otherwise consider moving and locking in for a few years. Rent is one of the largest “fixed” costs that businesses face, and this is a golden opportunity to reduce it.
- While you are at it: do you really need such large facilities? Think long and hard before you answer.
Staffing / Salaries
Having been laid off a few times in my life, I’m not a fan of suddenly downsizing. Layoffs should be an absolute last-ditch attempt to save a company from bankrupcy, not a way to maximize profits. There are a number of ways you can save on staffing costs during a recession though, not all of them immediately obvious.
- Give bonuses, not raises. If you happen to have a really good year, despite the economy, pass back some of the joy to your staff via bonuses, rather than salary increases. A salary increase tends to be permanent. A bonus lets your staff participate in the windfall that they helped generate, without tying you to the same amount the next year if things aren’t as good.
- Interns: I’ve had great experiences in the past “hiring” interns from high schools or college co-op programs, particularly over the summer. Its a great way for them to get experience, and it can be very helpful to boost your staff during peak seasons, without raising your salary cap.
- This could be an excellent time to shop for bargains on capital equipment. Many manufacturers are cutting their margins to clear out inventory. This doesn’t just effect computer manufacturers – even heavy equipment is selling at a discount at the moment.
- Look for second-hand deals. I know of several companies specializing in second hand manufacturing equipment, and many of them are doing great business right now. They’re getting used equipment from companies that are either cutting back their lines, or going under, and reselling it. Even at a fraction of the price of new equipment, they’re still able to make good money. Conversely, if you are looking for equipment, you can get it for a big discount if you buy used.
There are a number of areas I didn’t touch on here, including the manufacturing process. I don’t think I have sufficient experience in those topics to comment usefully. As usual though, I’d be interested to hear if anyone has other ways to cut costs.
If I had a dollar for every kid that tries to get me to answer their homework questions on Yahoo! Answers, I might have a better than average chance of paying all my bills this month.
Yes, we happen to live in an age where things are changing pretty fast. It still puzzles me that the most common reaction by schools and universities to the social media phenomenon is to try and ban it from the classroom. Hence the proliferation of websites that try to catch cheaters.
If I was running the show, I would try a different tactic: co-opt social media. Make it part of the game. There’s a great learning opportunity here, and it is being missed – at least in North America. In Europe, there’s a heavy push to incorporate e-learning into the classroom (see http://en.wikipedia.org/wiki/Computer_aided_instruction for some interesting related topics).
Here is how I react when somebody tries to get me to do their homework for them: hey kid, there is an awesome learning opportunity here. I’m not going to solve the problem for you, but I will try to teach you a few interesting things. Maybe I’ll rephrase the question for you so you can understand it better. Maybe I’ll point you in the right direction so that you can discover places online where you can learn more about the problem at hand. Maybe I’ll give you a few pointers on ways to approach a solution. Sounds more like a tutorial? Self assisted learning opportunity?
One critical factor is that one really needs something like a walled garden – at least initially, and at least for younger students. If you toss them onto Yahoo Answers and tell them “good luck kid”, they’re going to come back with some interesting (and probably odd) notions about how the world works. For one thing, many of the so-called experts on sites like these, ain’t. Even on the late, great Askme.com, there were more than a fair share of kooks. Many of the e-learning projects underway (i.e. the Second Life-based project in the UK) are building things around such walled gardens.
If schools – or maybe school districts – had a site that only kids and teachers could login to, it could be a powerful tool. You need a critical number of users before something like this becomes useful. I don’t think one school is sufficient. On the other hand, if the whole world is involved, it may become too unwieldy (and expensive to maintain – let alone the factor of who owns and manages it).
Let other kids get involved in teaching their peers. After all, teaching something is often the best way to learn it.
Let adult teachers supervise and guide the process. I envision a system that categorizes data by topic, and allows the teacher to put a filter on it – right now you can learning anything you want about math. Here’s todays quick lesson and some questions to answer. Here are the resources to learn more. Need help? Here’s what everyone else in the class is working on? Here’s who else in the school district can help you? Here’s what last year’s class did.
Put in scoring mechanisms so that students can get competitive if they want. Help your fellow student, two points. Get rated for the best question by teach and peers? Bonus points! It would be critical to balance a competitive system so that it doesn’t leave some students behind, possibly through an opt-out system. Or just let kids see their own score and rank, without access to anyone else’s.
Build in the day’s lessons in a way that the students can explore the topic in their own way and at their own pace, but with guides and video tutorials to help them if they get stuck. I know that this kind of learning methodology doesn’t work for everyone. There has to be a way to incorporate self directed learning into a pedagogical system though.
I wish there had been something like that when I was growing up. Yes, there were computers in the classroom (I got lucky with my schooling). Yes, we learned how to program in Basic and Logo. I also grew up reading Ender’s Game, and there were definite precursors to e-learning social media in there. The concepts involved here aren’t new, and the technology involved isn’t particularly challenging any more. There are even some fairly big companies building pieces of the puzzle – hence Blackbaud and their myriad competitors (e-learning overall is at least a $50 billion USD per year industry). All something like this needs is a vision, some corporate sponsors, and a lot of courage from school boards.
A friend of mine and I have had a running argument on this blog and on Facebook for a while now, regarding whether Twitter and other microblog sites are actually useful. His words were something along the lines of “high noise to signal ratio”.
I started with all the usual rehashed arguments again, before realizing that he possibly has a strong case that bears investigation.
Bear with me for a second.
I still think Twitter is incredibly useful – what I am realizing is that it has specific utility for specific people.
If you look at websites like Facebook and MySpace, their audience is on the order of magnitude of one hundred million people. Sites like Yahoo might even have a billion regular users. I’m not talking power users – that’s probably only a fraction of the overall total – what I am saying though it that those sites have a broad, overarching purpose to the general public. Give it enough time and everyone on the planet will have a Facebook account.
If you compare this to Twitter – with supposedly 10 million users (yes, I know, it is new and growing fast) – you see one, possibly two orders of magnitude difference in user base.
I have a number of theories why that is, but basically it indicates that the concept of microblogging is taking a very strong hold within a very specific segment of the market.
It also – based on my friend’s reaction – has a long way to go before it gains wide market acceptance.
The utility of a site like LinkedIn is immediately obvious to most people. You post up your resume, and then you do the same kind of networking activity that you might otherwise do at a BNI meeting.
Same goes for Facebook – you probably don’t have enough time to spend with friends, but you still want to see what is going on in their world.
When a newbie first logs into Twitter, chances are that what they see is a neverending stream of disjointed partial conversations, the vast majority of which are utterly incomprehensible to somebody not part of the original conversation. Its like having your head thrust into a gigantic undertow inducing stream of inside jokes and non sequiturs.
So why the disparity between my position that the website is so useful, and his that it is a not particularly funny, running gag-line? Is it just a matter of Twitter having a steep learning curve?
I’m not so sure.
What I suspect is that there is something deeper, and possibly more interesting going on. The usefulness of Twitter is actually highly, specifically targeted at a few core audiences. I don’t have a complete list, but they probably include:
- Marketers – whether offline (ad people, cool hunters etc) or online (SEO types), Twitter is THE place to catch the most current memes in circulation. If you want to know what the world is thinking right now, this is how you find out. I frequently am alerted to breaking news via Twitter seconds, minutes, even hours before anyone else gets it.
- Small business owners – a large chunk of the conversations that I personally engage in with other Twitter users basically amount to an exchange of experience or news or technical information that used to be the domain of card exchanges. Yes, you can get a better feel for the big picture of what somebody is about on LinkedIn. For pure immediacy though, this is the closest you’re going to get to actually pressing the flesh with a bunch of similarly-minded individuals. SMS doesn’t cut it – how would you find people like that in the first place. Its easy on Twitter, particularly if you use some of the other websites in its ecosystem.
- Not-for-profits and social activists – I have more than a little suspicion that heavy Twitter usage played a part in the phenomenon that carried Mr Obama to the White House. The ability for information to quickly disseminate from a broadcaster to a large number of followers – through a process similar to broken telephone – without losing the sense that it is a personal conversation, is unrivalled elsewhere. You can’t get that with television. Yahoo news? Never. A room full of people can only fit a few hundred or maybe thousand people, and you can’t ever talk to all of them. With Twitter, by the time a strong message has been “retweeted” to all ten million users, they’re all actively taking part in that conversation. And those ten million users are influential. For politics or chariities, or anyone trying to change the world, Twitter matters.
- Bored people. Yes, my friend has a point. There are a large number of people tweeting inanities for every person who has something useful and interesting to say. But if it makes them happy, what the heck is wrong with that?
Got some other ideas about what is happening here? Please let me know!
The topic of how businesses can make money online is one that I have been thinking about pretty much continuously for about ten years now.
Obviously there are large numbers of online businesses that do all kinds of interesting things.
What I’m interested in though is classifying their business models, so that I can understand them better.
There are only a very small number of business models that I have found so far. I could be missing a few.
If so, please let me know!
- Sell a product or a service – this is the most obvious business model, because it closely resembles the most common way that “brick and mortar” businesses make money. I class websites that sell memberships under this category as well.
- Sell advertising space – this is how most blogs (like this one!) make money.
- Act as a middleman – a good example is eBay, which makes money by allowing others to buy and sell from their platform.
- Beg – this is a common business model in the Open Source community. I’ve never been able to determine whether it works though.
There are lots of combinations of the above, which can blur the issue. I’m still trying to figure out how to classify companies that live off of venture capital without any income, and other companies that live off of government handouts. I think they are probably best classified as #4 in the list above. I can’t think of any other models for making money online though.
An example of one of the above business models can be found in the odd looking box below this line.
IF somebody happened to click on the box, I would possibly wind up a few cents richer than I currently am. Note that I can’t actually ask you to click on it, a) because that would be a violation of Google’s terms of service, and b) because I would then have to reclassify my business model from a combination of #1 and #2 in the above list to #4. And my pride won’t let me.
In any case, if you happen to think of business models that I’m missing, I would love to know.
There are a whole bunch of microblogging websites out there. Twitter is the biggest and best known right now, but I have accounts on about twenty other similar sites, and I’m probably missing a bunch – even though I research this sort of thing daily.
I think its pretty obvious that microblogging isn’t going away any time soon. It has too much value for too many people.
The big question is how companies in this space can actually make money. There’s a huge looming issue that isn’t going to go away any time soon, and its pretty simple: I have an account on an “aggregator” website that allows me to post to all twenty of the microblog websites that I use with a single button click. I have a similar system set up for my blog.
So how often do you think I actually login to those websites?
See, the big problem is that the only way a microblog site can make money – as far as I can tell – is by posting up advertising. And the only way they’re going to make money off of advertising is if people actually come to their site.
The vast majority of people who use sites like Twitter do so through software like Tweetdeck, or through aggregator websites like Ping.fm. If Twitter were to just turn off their API that allows other websites and software to post to it, its user base is just going to drift over to other microblog websites that still allow this function.
Charging money to use their API isn’t going to work either, because the software makers also aren’t making a buck yet. They give their stuff away for free too, and they also haven’t figured out how to turn their traffic into currency.
What we have here is a whole ecosystem of really useful websites, supported only by the burn rate of their initial venture capital investments.
My bet on who wins in the long term? Companies like Facebook, who actually have traffic “on” their website, not “through” their website. Maybe they will win by being the only ones left standing, or maybe they’ll win by buying up microblogging websites and keeping them on life support as a service to their users. Either way, my gut says that a bunch of sites that I really enjoy using aren’t going to be around for all that long.
Several people have expressed annoyance at the lengthy delay since the last post. My apologies. Flu plus a heavy workload do not lend themselves to frequent blogging.
People my age (tail end of Gen-X) came of age at an interesting junction in history. My parents grew up in a world where the accepted way to get ahead in life was to get a university degree, join a big firm, and then steadily work one’s way up the corporate ladder; retirement being funded by company pension plans, subsidized by government pensions that actually were worth something.
Something funny happened along the way.
Lifelong employment – actually any kind of employment – became passe. Instead, people somehow make their way essentially as free agents, passing time from job to job, hopefully surviving the intermediary periods of unemployment, eking out what living they may – and – with a great deal of luck – scratching together enough savings to (marginally) survive retirement.
After being laid off from a programming job during the last recession, enduring a year of unemployment, building a company with friends (5 years of blood sweat and tears), leaving it, being laid off again in the current recession, building a new company from scratch: I’ve come to the understanding that a) it is more risky for me to be employed by somebody than it is to be an entrepreneur, and b) I really wish that I had known more about business to start off with in the first place.
Pretty much everything I have learned about: running a business, marketing, sales, product development, managing people, collecting outstanding money from customers, balancing the books, finishing projects, handling troublesome clients – I have learned the hard way, by making horrible mistakes.
I sincerely hope that the example I set my (future) children will be different. I want them to learn financial literacy (not through crushing debt the way I learned it). I want them to learn entrepreneurship through example (not by last resort when chronically underemployed). I want them to be able to leverage off of my network of friends and business parters, the angel investors that I know, the worldly mentors I have met and befriended.
My children will do it differently.
My wife’s laptop suddenly stopped working last night. The theory I’m operating on is that the AC adapter has burned out. I called the manufacturer this morning and they referred me to a local company that they use for servicing.
The following is an (unfortunately all too typical) example of lousy customer service. I’m not sure how this “service” company stays in business.
I tried calling them this morning. Got their voicemail. Wandered from box to box for 15 minutes before getting somebody who had no interest in talking to me. I had to ask him whether I should come by. They wouldn’t commit. I decided to try anyway.
I drive to their shop, and there is nobody at the counter. Some guy with long hair walks out of the washroom, looks at me like I’m a martian, and then walks away back into the warehouse without saying anything.
There’s a bell on the counter with a note that says “please ring for service”.
I bang on the bell a few times, and eventually a manager comes out of their office.
Me: I have a laptop that needs servicing. Toshiba told me to come here.
Manager: “Sorry the technician is out”.
Me: Well what am I supposed to do?
Manager: “I don’t know.”
Me: Should I come back later?
Manager: “I don’t know.”
Me: Well I’d like to get my laptop looked at…
Manager: “I don’t know, why don’t you leave the laptop here?”.
Uh…so that you can lose it?
Me (stalling): “Well its probably the AC adapter”
Manager: “We would have to order that in, we don’t stock those”
Me: “Well somebody should probably look at it first, just in case it is something else”
Manager: “Well you could come by later and see if the technician is in”
Me: “You don’t know if they will be in?”
(Note: it is about two hours before they close, and I reside half an hour away from them)
I leave. Try calling again later. Finally get through the voicemail to the tech support extension. Nobody picks up, and the voicemail is full. I dial zero. Finally get somebody (they don’t identify themselves).
Me: “I’m trying to get through to the tech support people and nobody is picking up, and their voicemail is full…”
Somebody: “Oh. Well they’re there. I’ll go and make sure that they pick up. Hang on.”
On hold. Five minutes pass.
Somebody (I assume a technician) picks up. Their English is heavily accented. I don’t hold that against them. They don’t sound like they want to be talking to anyone. I do hold that against them.
Me: “I was here earlier today and the technician was out. I need to get a laptop looked at.”
Me: “Well how should I go about this?”
Technician: “I don’t know”
Me: “Do I bring it in tomorrow?”
Technician: “I don’t know”
Me: “Well will somebody be in?”
Technician: “I don’t know”
Me: “So how do I get the laptop serviced?”
Technician: “I don’t know. Maybe bring it in?”
Me: “Is there a standard way that you work? How do I go about getting a laptop serviced?”
Technician: “I don’t know. Bye.”
They hang up.
I’m not sure whether these people actually want the business of servicing the laptop or not. I’m not sure whether they even service laptops. I don’t know how to go about getting their service or their attention. I don’t know how to get in touch with anyone there. I don’t know what their standard procedure is. I truly don’t know how they stay in business.