September 27, 2005
Bootstrapping Is the New Black
Who needs venture capital anymore? Back in the day � when it was all about new hardware and complicated software, entrepreneurs needed years of research and a huge capital investment to get their companies off the ground. In exchange, they lost control of their businesses, and often their ideas, too.
Now, all you need are a few friends: one who knows ruby and a little java, a good designer with his finger on the pulse of what works, a good writer, and someone willing to fill in the business details. With a shared idea for a new web service, proof-of-concept is just months away. Today�s open standards and great developer tools mean that if you can think of it, it can be built � and cheaply: Bootstrapping is the new black.
Building on last year�s meme, beta is the new black, bootstrapping means that not only can you simultaneously define your market and serve it, but you can also build a business at the same time. With customers using a working product, decisions about what type of additional capital will be needed to scale are much easier to frame. And if you do decide to approach an outside investor, you�ll be holding more of the cards.
(1)September 22, 2005
Web 3.0 Will Be About Social Metadata
Some people have said that folksonomy is just a flash in the pan. Others claim that tagging is the future of knowledge management. I think they are just the tips of the iceberg.
I�m predicting that Web 3.0 will be all about social metadata. Specifically, by factoring in the opinions, naming conventions, web habits, locations, and behaviors of regular people and their “friends” � social metadata will *finally* humanize Google�s machine algorithm, make sense of the Yahoo! hodge-podge, and lead to hundreds of really fascinating applications to enhance:
- local and vertical searches
- recommendation engines
- search query articulation and facilitated browsing
- social networks around communities of interest
- knowledge management in corporations
- usefulness of user-generated content through reputation management
- and lots more
In fact, it�s happening � for all its flaws, Yahoo!360 already has most of the pieces in place. I�d keep an eye on what they�re doing with it.
September 21, 2005
Micro-payments for Content in a World Without Advertising
I�ve been working several online units of traditional media publishers lately and have been thinking about the business model of advertising-supported content � and what�s wrong with it. A lot of print media (and newspapers, in particular) have been really nervous lately about their declining subscriber base. Understandably, they are hesitant to invest heavily in their online units because more often than not this is thought of as giving their content away �free.�
Of course, it�s not really free. The same revenue streams exist for online media as print: subscriptions, advertising, classifieds, etc. However, online revenue potential appears to be lackluster and hard to assess � there are a few reasons:
1. Highly profitable, direct advertising sales requires infrastructure and relationships between buyers and sellers that are not as mature as in print media
2. Although a healthy source of income, contextual ad placement by Google or Overture is not as profitable
3. Online subscriptions decrease traffic and hurt advertising potential � also this is extremely unpopular with customers and alienates potential readers
4. Syndication deals with portals like Yahoo! or MSN increase traffic (which increases advertising revenue) but the publisher lacks control of when this traffic will hit
So let�s play �what if� for a minute. Let�s take the direct advertising sales model out of consideration since it will most likely mature with time. Instead, let�s examine the subscription-based model assuming that there is no revenue from advertising.
What if?
Instead of paying for a subscription, customers instead make micro-payments for content as they consume it. An average CPM for most content sites is about $10, which amounts to one cent per page view. What if I were willing pay that penny directly to the publisher? Heck, I�d probably be willing to pay five or ten cents for an article I know I want to read. What if all my content views were aggregated into one monthly bill for that publication? One step further, what if all my content views across publications were aggregated into one monthly bill? How much would I be willing to pay? If I read 1,000 online articles a month (which is a gross overestimation), we�re still only talking about $10 to $50 monthly.
For the sake of taking this model a little further, let�s put advertisers back into the equation. How much would advertisers be willing to pay for access to metadata on all the aggregate content I had consumed that month? If they paid me, my �subscription� would then be free. Although fantasy, this model gives online publishers a more reliable revenue stream (in addition to advertising); it gives me the ability to broker my value as a consumer; and it gives advertisers better data with which to target ads.
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