Archive for the ‘Internet business models’ Category

BusinessWeek's for sale, the industry is surprised. I'm not.

Wednesday, July 15th, 2009

NOTE: I’ve got some new blogging gigs – primarily for businesses that I’m operating and launching as part of Pure Incubation – and I want to make sure that I’m sharing the content that I’m producing on those blogs here (in case you care!) So when I blog elsewhere, I’m going to include pieces of those posts here and link to the full posts. FYI!

Here’s the article…

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Apparently the media industry is “stunned” that BusinessWeek is for sale. Really? Stunned?

Today’s article in B2B Media Business cites the following:

  • - BusinessWeek lost $85 million in 2008
  • - BusinessWeek has already lost $20 million in 2009
  • - BW’s ad pages declined 17.2% in 2008
  • - This year, BW’s ad pages have declined 36.8% compared to the same period last year- This year, BW’s ad pages have declined 36.8% compared to the same period last year
  • - BusinessWeek’s online catalogs sellers of viagra and cialis in the usa ad pages have dropped 69% since their high point in 2000
  • - Print ad revenue has fallen 59% in the same time period

BusinessWeek coverWhy are people stunned that McGraw-Hill would want to offload a business unit that is bleeding so severely? I understand that BusinessWeek’s brand is valuable and important, but most companies – including McGraw-Hill – can’t absorb $80 million in losses year after year.

I suppose that the shock and dismay people feel at the loss of well-established print entities shouldn’t surprise me. Just look at the outrage that people felt at the thought of the Boston Globe possibly closing its doors, even though that publication is on track to lose $85 million this year.

Read the full article on the Sauce Technology blog

Three tips for surviving a business dinner

Wednesday, July 1st, 2009

The business dinner is one of the most important functions I attend. Sometimes these dinners happen following a long day of meetings, sometimes they happen the day before the important meetings, and other times they are stand-alone events.

Of course, there are some tips for setting up a good business dinner. Things like – if you’re booking the restaurant, only go somewhere that you’ve been before and that has a wide range of types of food and a quiet enough atmosphere to allow for conversation to happen easily. And other suggestions such as – pick a place that has parking because you don’t want to frustrate people by making them drive around one-way streets looking for a meter spot for a half hour (I live in Boston, this is VERY important!) But these three tips are about getting the most out of the business dinner.

1 – Listen first, ask questions and keep it brief. People love to talk. And they particularly love to talk about themselves. If you’re at a business dinner, this also applies to people loving to talk about their work, the company that they work for or the business that they started. Before you start talking, let them tell you about themselves. If they don’t do it naturally, ask them some questions. If question-asking doesn’t come easily to you, plan the questions ahead of time. “Tell me about what you do” is a good starting point. Ask questions about the history of the company, the role that they play there, big contracts, their areas of growth and their plans for the future. Ask questions about their family, where they live, when they mention their hobbies, ask about those. Be interested in the people who you are dining with – that will go a long way. On the other hand, don’t talk too much. If there are two of you, you should talk less than 30% of the time. If there are more than two of you, the percentage should drop to less than 15%. And most of that time should be asking questions and talking about topics that your dining companions bring up first.

2 – Find common ground (aka don’t get on your soapbox & don’t take offense). When you do talk, make sure that your topics are neutral or related to something that they brought up first. It’s totally OK to talk about your business (you’re at a work dinner, after all) and anything related to work that you are passionate semenax vs about, but you don’t want to offend your dining companion. You’re not out to dinner with friends, so you don’t know what these people think – about anything. It’s better to leave the debate for conversations between friends – you are trying to find commonalities, not differences.

If someone that you’re dining with says something with which you would normally take offense, let it go. A business dinner is not the place to correct or educate your dining companion on the places that they are wrong or that their opinions differ from yours. Of course, you should take everything that is said into consideration when you’re trying to decide whether to do business going forward – but getting your guard up is not going to help anything in the middle of a social dinner.

3 – Be likeable. This is probably the most important point of all. Even if you violate the first and second tips here, and talk too much and about controversial topics, but people like you, you’re going to be OK. Being likeable is a challenging thing to quantify, though, because everyone thinks that they are likeable. So to be sure that you can accomplish this, you’ll probably have to enlist the help of a partner, co-worker or trustworthy friend. Ask them to help you. Find out from your co-workers what part of your job that you talk about too much. Ask them what aspects of the job they think are most interesting – focus on those things. Check with your friends – the ones that you think are the most likeable – and ask them what stories you tell that are their favorites. What stories do you tell that make people laugh? What are some interesting things about you? What are some pieces of trivia about the place that you’re visiting (you can look these things up ahead of time!) What’s a quirky but interesting story that you read in the news recently? What’s something interesting about the town that you’re from? These types of stories are things that you can think of ahead of time – so when there is a lull in the conversation, you can pull them out and be likeable with your good stories, your interesting anecdotes and your fun tales.

At the end of the day, the business dinner is all about relationships. And they are often the difference between signing the contract across the conference table when the meeting moves from dinner to the board room.

Photo by swami stream

Prediction markets, the Kindle & the Industry Standard

Wednesday, February 4th, 2009

Prediction markets are speculative markets that are created for the purpose of making predictions. Basically, a prediction is made and then people bet on whether that prediction is likely or unlikely to take place. According to Wikipedia,

“People who buy low and sell high are rewarded for improving the market prediction, while those who buy high and sell low are punished for degrading the market prediction. Evidence so far suggests that prediction markets are at least as accurate as other institutions predicting the same events with a similar pool of participants.”

The most interesting thing (to me) is that prediction markets have proven to be quite accurate at determining the outcome of future events using the wisdom of crowds. And prediction markets are used in all kinds of industries, from finance to politics to entertainment.

Prediction markets are also used in the tech industry, where a prediction market was launched by The Industry Standard in February 2008. This is where I come in.

I’ve been writing for The Standard for awhile, but today marks the beginning of a new assignment – tackling the Industry Standard’s tech prediction market. I’ll be writing a couple of times a week about The Standard’s prediction market, and various technology predictions that are current on the site.

Amazon KindleMy first article debuts today discussing an upcoming announcement by Amazon. The company has announced an “important” press conference on February 9, but hasn’t released any details about what that press conference will entail, leading to widespread speculation that the company will release version 2 of the Kindle next week. So will Amazon launch Kindle 2.0 next week? The market is currently saying “yes.”

I’d like to invite you to participate in the Industry Standard’s prediction market with me. Come and vote for and against the tech predictions that are up on the site right now. And please comment, send me thoughts and suggestions, and provide your insights about the various predictions that are up on the site. I will always be looking for more ideas and topics for discussion.

Come and cast your vote at The Standard today.

Long live the media brand

Thursday, October 2nd, 2008

I just posted my latest article on The Industry StandardWhat The New York Times, The Wall Street Journal and CNN are doing wrong.

It has already been well-documented that online media is eating away at print revenue. Take The New York Times for example. According to Scott Karp, from “May 2006 to May 2007, print ad revenue for the News Media Group decline $19.2 million or 14.4%, dwarfing the $2.8 million increase in online ad revenue.”

Broadcast revenue is also on the decline. According to Nielsen Media Research, although National Cable TV and Spanish-Language TV were up slightly, Network TV and Spot TV Markets were down significantly in 2007.

The good news for print and TV is that they’ve moved to the Web. Now they just have to figure out how to do it right.

Print and television brands are some of the most well-known in the world. Just think of the names – The New York Times. CNN. The Washington Post. NBC. It would be difficult to find someone who doesn’t recognize at least one of those companies. And the audiences have followed the brands online. According to the data (see chart, below), many mainstream print and TV outlets have huge – and growing – online audiences.

Compete data for print media sites online

In my opinion, building an audience is the biggest challenge to overcome online. The second is producing content that anyone cares about. So these companies are more than half-way there. If they can just get their business models figured out, they just might have a shot at not only surviving, but thriving.

Types of online advertising

Friday, August 22nd, 2008

My cousin Jay (hi Jay!) is in the process of building and launching his own online business, and he sent me a note this week (OK, he sent it two weeks ago, I’ve been busy!!) asking me about online advertising and how it works. I ended up writing him a fairly long-winded email in response, but I thought that there were enough nuggets in the message to make it worth re-posting.

Offline advertising

Here is a (somewhat edited) version of the email that I sent him. Please forgive me for the rough format.

The most basic type of Internet advertising (which is sometimes called “online media” or just “media”) is the standard banner ad. The banner ad has been around for years and was pretty much the first type of advertising that was sold online. When banners first went up, they got high click-through rates and companies could charge high fees for them, but the rates have dropped significantly over time. Banner advertising is usually sold based on a CPM (cost per thousand) basis calculated against page views. CPMs vary depending on the market that you’re in – consumer markets get a lower CPM than B2B markets – and they range usually anywhere from $10-$40 (approximately). The reasons that B2B audiences can charge a higher CPM is that there is the assumption that they are reaching a “higher qualified” more “high-value” audience. To sell this type of advertising, you’ll need quite a bit of traffic, and some information for potential advertisers about the type and quality of audience you reach. Demographics, reach, influence, etc. will all help. In the consumer market, advertisers are looking for a lot of reach – meaning high numbers of page views. Also, to run banner advertising on your site, you’ll need some kind of third-party ad server (a company that serves the ads and measures delivery and click-through for you), such as Doubleclick/DART. Also, it’s probably worth mentioning that “banner” advertising has evolved to include all kinds of ad sizes and types, such as skyscrapers & leaderboards (refers to ad sizes), interstitials (the type of ads that pop up as you go from page to page on a website), overlays, etc.
 
If you are interested in running banner ads on your site, but you don’t want to have to sell the ads yourself, there are a lot of third-party ad networks that will use your available inventory (pages on your site) to run their ads, and you get a percentage of any revenue generated. This is a good option for early in a business when you don’t have the sales staff and technology resources available to do serious selling. Blue Lithium, Tribal Fusion and Casale Media are some companies that do this.
 
If you don’t have the page views that you need to sell straight banner ads on a CPM basis, you might try to sell a site “sponsorship.” This is often harder to sell (especially these days) because with sponsorships you aren’t necessarily guaranteeing page views or any other measurable metric (although you could guarantee those things), but instead you are offering companies the chance to have exclusivity or sponsorship of a specific section of your site. Sponsorships can get complicated, but you can basically cook up any kind of arrangement that you can think of.
 
Google AdSense is a great way for publishers (and Websites) to get started with online advertising. It’s easy to sign up for an account, and by setting things up and “playing with” Google’s tools and going through the training, you’ll pick up a lot of the online advertising terminology and best practices. It’s also the kind of thing that you can set up and forget – so it will just run and serve on every page of your site without a lot of interference. I run Google AdSense on many of my sites, and it does produce revenue – again, the higher the value the keyword and the more page views you have on your site, the more money that you’ll make. On the flip side (from the advertiser’s perspective) most marketers who do online promotion use Google AdSense (although when you use it to advertise, it’s called AdWords), primarily because it’s a type of “performance-based media” that shows advertisers/marketers immediate “ROI.” These two terms you will see again and again with online advertising, as the trend with online marketing moves to media that has measurable results. The other great thing about Google AdSense is that it will help you quickly be able to track your monthly traffic and page views and what your traffic is “worth.” So if you’re doing financial modeling you can include that data for potential investors.
 
Another ROI-based type of online advertising is lead generation. Lead generation is when an advertiser/marketer pays you money to know more about specific members of your audience than just that they “viewed” an ad. With lead generation, advertisers usually get contact information (either email, phone, mailing address or all three), and other pieces of data that they consider to be valuable. With lead generation, companies are able to get anywhere from $10-$200 PER LEAD (as opposed to the $10 CPMs that I mentioned earlier), because the companies are willing to pay to know specifically who their potential customers are, and for the ability to market to them in the future. Lead generation works best on a site where users need to register to access data/services/etc. 

 

A variation on lead generation is co-registration, which is where a company that collects registration data can add a question or a check box on their registration form asking “would you like to receive information from X company?” If the user checks that box, they are “co-registered” for both your site and the other company’s site, as well.
 
ONE WORD OF CAUTION ABOUT ONLINE ADVERTISING AS A BUSINESS MODEL. (This was applicable to Jay, but might be relevant to you as well, so I’m leaving it here.) Since you are building a site that requires users to enter a lot of data, fill out forms and generally interact with the site a great deal in order for the site to be successful, you will need to think very carefully about on which pages it makes sense to have advertising. For example, running Google AdSense is fine on an information page (a page that someone gets to and might realize that they are in the wrong place), but putting Google AdSense on a registration page, where it might distract a potential registrant from completing a form, is not the best idea. In that instance, getting them to complete the reg form is probably worth far more than having them click that Google AdSense link.

 

I hope that this helps someone out there! If you have any questions, please feel free to post them below and I’ll try to answer.

An argument against The Long Tail

Monday, July 7th, 2008

The Long Tail is a concept that was set forth in 2004 by Chris Anderson, editor-in-chief of Wired, which was then turned into a 2006 book. In short, the idea is that because of the Internet and it’s infinitely wide and Long tail monkeyincredibly low-cost distribution capabilities, the big “hits” of popular culture (be they movies, music, books, etc.) are no longer the only things that will make money. Now, the “misses” will also be money-makers.

But a new article by Anita Elberse just published in the Harvard Business Review called “Should you Invest in The Long Tail” is taking a closer look at the theory and suggesting that businesses really shouldn’t shift their promotional dollars to the long tail – and instead should stick to promoting the winners. She comes to this conclusion after determining that the tail, although long, is very flat and accounting for very few sales, and typically less satisfied consumers.

Anderson replies here.

Elberse responds to Anderson here.

This is a very interesting debate, and one that should be followed by anyone who is involved in marketing or advertising online. Anderson and Elberse have taken a great deal of time looking at data and doing analysis on this concept, but here are some thoughts based on reading the articles.

– Anderson seems to be focusing on the fact that online retailers like Amazon.com will begin selling a lot of items in the long tail. Whether or not it’s true is practically irrelevant for the vast number of online businesses. Most businesses don’t have the reach of Amazon.com and are targeted at a much smaller audience. The people who run those businesses know that 80% of their business comes from the top 20% of their clients and customers – so they will continue to focus their attention – both time and money – on reaching those clients/customers. Now they have Elberse’s data to back them up.

– People buy stuff that other people like. This is why user recommendations (such as those on Yelp or TripAdvisor) are so popular, and why the head of the tail keeps growing in popularity. People like to have a choice, but when their time is limited, they typically will go with the easier choice. And it’s easy to choose something that has been recommended by someone they trust – or an online audience of their peers.

– The long tail does exist and consumers are benefiting from more choice – but the tail isn’t a place that any musician or artist or blog or business wants to be. And may not be a place where money can be made. According to the data collected by Elberse and cited by Anderson, “In music, of the 2.4 million digital tracks sold in 2007 in the US (most of them through iTunes) 24% sold only one copy and 91% sold fewer than 100 copies.” 100 copies sold through iTunes (at $.99 each) isn’t even enough money to buy a new guitar.

Photo by loufi

MySpace vs. iTunes

Friday, April 4th, 2008

My most recent article for The Industry Standard just went up – How MySpace Music could beat iTunes. If you’re interested, please give it a read!

The music industry is something that I’m really thinking about lately with the launch of Fat J Records and signing Cara Austin – so the recent news about iTunes overtaking Wal-Mart and MySpace Music’s launch are both of great interest to me. And there are a lot of things about the MySpace vs. iTunes topic that I didn’t have space to include in my article for The Standard. So I thought I would just list them here, kind-of stream-of-thought.

MySpace logoMySpace Music can beat iTunes by supporting musicians. This is the premise of the article that I wrote for The Standard. Basically, I think that if MySpace Music provides data about the fans that purchase music, ticket and merchandise to the musicians, it can beat iTunes. Go read the article for the whole argument.

CDBaby is a model of how MySpace Music could work. CDBaby is an unbelievable music retailer that caters only to independent artists. And this is what its privacy policy says (these points are directed at buyers who visit the site):

“Only the musician whose music you buy will know who you are. If you don’t even want the musician to know about you, just say so at the bottom of your order form.”

I use CDBaby to sell CDs for Cara Austin, and so far, NOT ONE person has requested that CDBaby withhold their contact information. This is because people who go so far as to buy a CD are usually fans – and they don’t mind the band or artist being able to contact them again in the future.  According to the company’s Website, CDBaby has sold 4,202,465 CDs to customers resulting in $71,482,212 paid directly to the artists.

iTunes is a store, MySpace is a community. I read this quote from someone involved in the deal, and this is a really important point. While there are millions of people who buy music from iTunes, the MySpace community that uses MySpace to discover new artists and read about what they are up to, will be a powerful environment for making a purchase. With the possibility of revenue coming from MySpace, artists will do even more to make sure that their pages are attractive, interesting and compelling. And the community of music on that site is going to get stronger and stronger. Imagine 5 million musicians adding content, video, new songs and new song versions – this is going to be incredibly powerful and impossible for iTunes to rival.

Facebook’s chance to win in this space is shrinking by the minute. Facebook is gaining on MySpace in the social networking space, but Facebook’s support of music is, well, pathetic. They are going to have one shot to try to release a music platform that users will like (and use) but it’s not looking good. With MySpace’s announcement of the support of three of the four major labels, one possibility is that Facebook already has the support of the fourth (but that is highly unlikely and just speculative on my part).

International will be huge. I read that MySpace Music isn’t going to be able to distribute music internationally yet. What? What is the licensing issue with that? My suggestion – sign up all the indies asap and start selling to Japan, England, Australia, and everywhere else that has an appetite for U.S. music immediately – or else that could be a place that MySpace Music will be vulnerable.

DRM free matters, but won’t be the thing that wins it for MySpace. As part of the announcement, MySpace announced that they music that is sold from its music store will be DRM-free. (DRM=Digital Rights Management, it is the protection that Apple places on its files that prevents people from being able to share them.) This is a big deal, but not the biggest, as this will just (finally) compel Apple to follow suit with iTunes.

There is still a perception issue that could cause MySpace some serious problems. MySpace has kind of a seedy image. The site’s design is fairly unattractive, and it’s hard to navigate the social network without running into something that borders on pornography or spam. The company is going to have to do battle against that perception to win back people who have become disillusioned by previous negative experiences with MySpace.

Can Apple prevent iPods from using this service? Technically, I’m not sure if there is a way for Apple to limit the sites from which the iPod can download music, but if users are unable to load music from MySpace Music to their iPods, that would be a serious setback to MySpace. It also would likely cause a revolt among iPod users against Apple, but it would still be a hiccup in the acceptance of the service.

I'm launching a record label

Tuesday, April 1st, 2008

Anyone who has read this blog for any length of time knows that my company Pure Incubation is working on starting lots of companies. You probably also know that when I get to announce the launch of one of them, I am really excited (and usually a bit relieved!)

Fat J Records logoToday I get to announce that my latest project is launching: Fat J Records.

I’ve been working on getting this independent record label off the ground for awhile, but I feel like it’s finally official because I’ve signed my first artist: Cara Austin.

Check out her site here: www.caraaustin.com.

I’ve mentioned Cara Austin here before – because I really like her music – but now I am more than just a fan, I’m her label.

To be honest, I’m still figuring out all the kinks with what’s involved with owning and running a record label. The idea to even start this type of business came from a post that I wrote earlier this year about the music industry and the things that are changing with the way that music is sold and promoted because of the Internet. That post is here if you want to give it a read.

The bottom line about the online music business is that no one has it just right yet, so I figured that I might as well jump in now when all the fun stuff is happening.

One thing that I know for sure is that the Internet is changing the fan/artist relationship, and with that in mind, Cara Austin’s blog has launched on Tumblr. I think that the Tumblr microblogging platform might be just perfect for an artist blog that will likely include a lot of pictures, quotes, and short bits and links, as well as video and audio clips. I’m going to be the primary writer of the blog, and I won’t only be posting about Cara Austin and her musical career, but also about our adventures in exploring the online music industry – so feel free to give a read or follow us there.

Second, I don’t think that the online music business models are going to be figured out by one small independent label working alone. So with this post, I invite all of you to get involved. Do you have ideas about what needs to happen to change the music industry? Why don’t you post them here. Are you an independent record label yourself, or an Internet business that is making the best use of the new music models that are emerging? Let’s work together. Send me an email and let’s see if and how we can collaborate.

The launch of a business is always exciting. But today is particularly thrilling for me as the music industry is all new for me. It’s seems sure to be a wild ride.

More on starting a company in an economic downturn

Friday, March 21st, 2008

Yesterday, The Industry Standard published an article that I wrote about why it’s a good idea to start a company in a recession. The article is here. (You should probably read it if you want to follow the rest of this post.)

Hacker News logoThis article generated quite a bit of buzz on Y Combinator’s Hacker News, so I wanted to take a minute to respond to some of the comments. Here’s the link to that chatter.

– The most common disagreement with the article seemed to be that many of the points that I was making about why it would be good to start a company in a recession also apply to starting a company in a boom. I agree completely. However, we unfortunately are not in a boom at the moment – we’re in (or entering into) a recession. The viewpoint of the article is “since we’re in a recession…” not “if you could pick between recession or boom…” I wholeheartedly agree that if you could set your ideal conditions in which to start a company, a boom would be the time.

– One commentor wrote: “start a company at a time and a place where there are no constraints and even the biggest idiot can be successful.” I disagree with the notion that there is ever a time that there are no constraints on a start-up. If there aren’t constraints, there should be. And this is the point I was trying to make. In a boom, start-ups don’t always SEE the constraints as readily or operate with restraint – but they should if they want to be using best business practices and give themselves the best chance of success. A recession forces those contraints on a start-up – but those constraints aren’t BAD. They help set good patterns and behaviors for running a business.

– In my opinion, it is not true that there is ever a time or place that “even the biggest idiot can be successful.” Successful idiots – especially in the world of start-ups – are rare.

Finally, various commentors suggested three other reasons that it’s a good idea to start a company during a recession and I wanted to include them here because I thought that they were worth mentioning:

1) “Your competitors will go bust.” -m0nty

Another commentor put it this way:

“Because the well-funded riff-raff drops out sooner.” -edw519

2) “Businesses that increase market efficiency in novel ways seem, to me, more likely to succeed during a recession. This is so obvious that I’m surprised the article didn’t mention it.” -mkn

3) “Also could get one more attention — maybe — because the media won’t necessarily expect anyone to be doing anything positive. Recessions are one big moan, and the ‘yipee!’ of a startup will stand in stark contrast.” -sabat

Thanks for all your commentary – keep it coming.

(Update: The discussion is continuing here: http://news.ycombinator.com/item?id=142792)

My new gig: The Industry Standard

Thursday, March 20th, 2008

I have been a fan of The Industry Standard for a long-time – I have written about them before, and many of you will remember the magazine version of The Industry Standard as being the fastest growing magazine of all time before the bubble burst, taking The Standard down in its wake. Now The Standard is back, with an online-only site that focuses on a prediction marketplace.

And I’m the newest writer/contributor to the site.

My first article is up now – Five reasons why a recession is a good time to start a company. Go read it, comment on it, let everyone know what you think about it. And then come back to 16thletter and let me know what you think.

Industry Standard article