On the ride to heaven a consumer is informed he’ll have the opportunity of sampling both heaven and hell before deciding where he wants to reside for time immemorial. A bit nervous but wanting to get it over with, he decides to sample hell first. After a long elevator ride down, he is greeted by a friendly guy in a tuxedo. Before him is a vast hall filled with great music, a nonstop party, wonderful food and booze, and all his friends who have gone before him. Reminded after a while that it’s time to sample heaven, he gets back on the elevator and up he goes.
Upon arrival in heaven there are lots of little angel wings and soft harp music but no party. Frankly, it suffers in contrast. After floating on a puffy white cloud for a while he’s approached by Saint Peter, who asks if he’s made a decision. “Yeah, I have. No offense to you, Pete, but this place is pretty boring. I think I’ll pick hell.”
With a click of his saintly fingers our consumer finds himself back in hell but this time a nasty-looking Lucifer with horns, tail and pitchfork greets him and he’s surrounded by ranting and wailing people boiling in cauldrons.
“Hey, what’s up?” he asks. “This isn’t the hell I remember!”
“That’s right, it’s not,” grins the devil. “The last time you were here you were a prospect. Now you’re a customer!”
He didn’t write the story himself, but doesn’t remember the original source. If you know where it came from, let me know. Great story though!
Don’t treat your customers like crap just because they’re no longer prospects. Be consistent in your customer service. Treat them great, no matter where they are in your pipeline.
They’re talking about the Stanza iPhone app. It’s been available free on Apple’s (AAPL) iPhone App Store since July 2008 and has been downloaded more than 395,000 times at an average installation rate of 5,000 copies a day, according its developer, Lexcycle.
By comparison, Citigroup estimates Amazon will sell around 380,000 Kindles in 2008… In other words, Apple may have inadvertently sold more e-readers than any other company in the nascent digital book market.
That’s fine though. I’m still exceited. To me, this is yet another data point on the validation of the e-book market.
I know, it’s a stretch to claim that Stanza has validated e-books to the mass market. But it does show to me that there is a growing early adopter audience who’s learning a new behavior – reading books on electronic devices. As this audience grows, they’ll provide a good reference base for the early majority.
Validating a New Market
Every time a disruptive technology enters the market, people either:
Learn how to use it because it solves a problem satisfactorily and is worth the learning curve
Or ignore it because it doesn’t solve squat and/or the barrier for adoption is just too high
In many cases, one company inadvertently helps another by teaching the market the benefits of its solution, thus paving the way for stronger competitors. Take VisiCalc, Lotus 1-2-3, and Microsoft (MSFT) Excel, for instance. Before there was any spreadsheet software, there were pencils and paper. Not all finance professionals saw the need for doing their work on a computer.
But then they saw VisiCalc in action and were hooked. VisiCalc, in effect, had validated the spreadsheet software market.
Soon thereafter, Lotus 1-2-3 stepped in and one-upped VisiCalc. It had more desirable features, such as automatic graph creation and macros. Then Microsoft Excel entered the market and changed everything. Some argue that Excel wasn’t a better product, but Microsoft was a stronger company. Using the distribution power of its operating system, it swallowed up the spreadsheet market.
Being a Strong Competitor
Just because you validate a market doesn’t mean you’re doomed to failure. It’s a case of the first-mover advantage. In some markets, strong companies can validate the market and own it through exploiting a network effect (where the value of your offering increases exponentially with the size of your customer base). Amazon and eBay (EBAY) are popular examples of this.
What’s more important is being a strong competitor. In the spreadsheet software market, Microsoft was that strong competitor. They were able to exploit a second-mover advantage:
A second-mover firm… does not face the marketing task of having to educate the public about the new project because the first mover has already done so. As a result, the second-mover can use its resources to focus on making a superior product or out-marketing the first mover.
In Stanza’s case, I doubt they’re doing any marketing to educate the market. This hasn’t stopped them from creeping onto Amazon’s turf, however. Although they only offer public domain books right now, they’ve been working on some deals with major publishers. I smell a battle.
This is where being a strong competitor will win out. Amazon has the muscle of vast resources, brand name, and most importantly, publisher partnerships.
Is There an E-book Market?
Which brings me back to why I’m so excited about this news. I believe Amazon’s got the right approach, though there’s been some debate about whether or not this market exists. Do readers really want e-books? Or are they already satisfied with regular books?
In my opinion, yes, there is a market. Yes, some do want e-books (I sure do!). And Stanza helps to validate that. While I know it’s not representative of the mass market, its quick adoption shows that it’s not e-books themselves that are holding consumers back, it’s the lack of easy-to-use e-book devices.
Fortunately, I believe Amazon has the strength to pull this off. I have high hopes for them in creating a usable and enjoyable (and hopefully, delightful) e-book reader. They just have to keep on listening to their customers and improving their device. They’ve got the Amazon Store in place, e-books in the inventory, and some early adopters already using it. Now it’s a matter of putting out a cheaper and better device.
And that, apparently, caught the eye – and ire – of Google (GOOG).
Joe Nocera of the NY Times wrote about Sourcetool.com’s dilemma last Friday in his article, “Stuck in Google’s Doghouse“. In short, Sourcetool.com was making $653,000/month in revenue by spending $500,000/month on Google AdWords. That means bidding on sponsored search keywords for about $0.05 – $0.06 a pop to bring traffic to their site, then getting around $0.10 each time someone clicked on an ad. Though Sourcetool.com is adamant that what they’re doing isn’t ad arbitrage, their business model essentially is.
Then Google made some changes to their AdWords algorithm, resulting in an increase of Sourcetool.com’s minimum bid requirements to $1, and in some cases: $5 or $10. The reason given was that Sourcetool.com’s landing pages were not high-enough in quality – they weren’t sufficiently “googly”, in Google-speak. Even after numerous phone calls, rebuttals, and changes to their landing pages, the minimum bid requirement remained. Google’s stance is that their algorithm has spoken. Sourcetool.com’s stance is that something unfair is going on, since Google has made exceptions to others before, including to one of Sourcetool.com’s competitors.
Whatever the case, this basically killed Sourcetool.com’s business model.
Let’s instead talk about Sourcetool.com. Here’s a business that had figured out a way to generate nearly $1.4M a year with a single web property. Not bad!
However, 100% of that revenue was dependent on one source – Google. (Or, more specifically, Google AdWords to bring in traffic, Google AdSense to monetize that traffic.) There’s a strong inherent risk in that. They are at the mercy of one source, and should that source change its policies, go under, or simply turn its back on them, then they’re screwed. And that’s exactly what happened. They got screwed.
To be fair, there are lots of small businesses that rely on one source for their customers and revenue, be it a single product or service, or a single online marketplace like Amazon (AMZN) or Ebay (EBAY).
You know the cliche “don’t put all your eggs in one basket?” When that basket breaks, you’ve lost all your eggs. That’s what will happen if you have only one customer or revenue source. When it breaks, you’ve lost all your customers and all your revenue.
Although it’s not as relevant to Sourcetool.com, I’m going to touch on product diversification first. In today’s economy, product-line diversification is essential for business stability – just as portfolio diversity is essential for investment stability. Even large corporations realize this. The Walt Disney Company (DIS) is famous for diversifying from cartoons to movies to amusement parks. Apple (AAPL) went from personal computers to mp3 players to mobile phones. And Starbucks (SBUX) sells everything from espressos to board games to CDs.
Which, of course, begs the question – can there be too much diversification? Yes, if it goes beyond your core competencies and brand. But that’s another discussion.
Now let’s touch on marketplace or channel diversification. You can look at Google as a kind of distribution channel for Sourcetool.com – it was the primary way for them to acquire customers. No Google, no customers. That’s a pretty simple and scary formula.
The reality of the situation is that Google directs the majority of web traffic nowadays, so most any web-related business needs to work with Google to some extent. But fortunately, there are alternatives.
According to the article, Sourcetool.com was only using Google AdWords to generate traffic. I’m sure that wasn’t the only method, but for the sake of this discussion, let’s assume it was. Here are some other methods:
Using the direct URL method means massively branding your URL so your customers know it and can type it into a web browser manually. It’s probably the most costly method, but lots of start-ups with strong brand recognition do this – such as Flickr.com, YouTube.com, and PayPal.com. Same goes for large corporations like Pepsi.com, BankOfAmerica.com, and NYTimes.com. (Sure makes having a .com domain name pretty important, huh?)
It’s certainly not easy to diversify your online channels, but relying on one 100% can be disastrous. Say you relied on Google for 80% of your traffic, Yahoo for 15% and MSN for 5%. You’d still have 20% of your traffic if your relationship with Google changed. That’s better than 0%, right?
And as a bonus, for ecommerce retailers out there, Amazon and Ebay aren’t your only channels. The list above also applies to you, as well as these online shopping comparison engines & marketplaces:
Now let’s touch upon revenue diversification. Sourcetool.com’s only source of revenue is Google AdSense. Though their current problem is more about customer acquisition via a single channel, it wouldn’t hurt to diversify their revenue streams too, especially if Google were to kick them out of AdSense.
Fortunately for business owners, AdSense isn’t the only ad network in town. There are dozens of others, though none seem to do content matching as well as AdSense right now. Since I’ve listed a bunch of them in my entry about blogging for cash, I won’t repeat them here.
There are also affiliate programs, which work like sales commissions. If you help a retailer sell an item, they’ll pay you a percentage of the sale. Some savvy affiliate marketers are able to make six-figure checks doing this. You’ll also find a number of affiliate programs on my list.
Along with the ads model are sponsorships. Sourcetool.com could try to get sponsorships from various retailers to earn extra income. That would change the nature of their directory though, as they tout themselves as a free directory right now.
There’s also the subscription model, though I’m not sure what kind of premium content Sourcetool.com could offer.
Relying on a single source of customers or income from a single product or service is an inherently dangerous business model. If that source goes away, so does your business. To solve that, you need to diversify.
If you’re relying solely on Google AdWords for traffic, consider diversifying. Try Yahoo. Try MSN. Try social media marketing. Diversify your customer acquisition methods.
Same goes for your revenue sources. If Google AdSense is your only income generator, consider diversifying. Try another ad network. Try an affiliate program. Try subscription models. Diversify your revenue sources.
Good luck! And remember – diversify diversify diversify!
It has since been followed up by a second movie, which stars the Advertiser, CEO, and Creative Director (with the last “R” turned backwards for extra irreverence), and a companion blog called Get Inspired Here. Unfortunately, I didn’t find the second movie as, uh, inspiring. The first one was hilarious. A great play on a couple’s break up. The second one, eh. What was it a play on? A corporate meeting with executives and marketing personnel? That’s just not as funny.
I think they’re working on a third one right now. Hopefully it’ll be better. Good luck guys!
Here’s a random idea I once had. You know those ads you see plastered inside of restaurant & bar bathrooms? They’re usually behind a plate of glass and right at eye-level.
Advertisers pay to get that “captive” audience. (When you’re, uh, lightening your load, you’re a captive to anything you see right in front of you.) And restaurants & bars get additional income from those adverts.
Those are the ads I’m talking about. Some companies have even gone a step further – some have installed flat-panel screens to show video ads. Now you can watch the latest Batman trailer while emptying your bladder for more beer. Not a bad idea, if they could be installed on bathroom stall doors, though that might encourage people to take longer than necessary.
Now here comes my idea. Drum roll, please. Budda budda budda budda…
What if you operated a business-to-business company that offered portable flat-panel screens for digital & video advertising? They could be as small as a regular laptop screen. Your customers would be any kind of business that has customers that have to wait – like busy restaurants, dentist & doctor offices, oil changing services, etc. These screens could be placed in their waiting rooms, so their customers could have some eye candy, instead of tapping their toes and staring at the ceiling mindlessly. Impatient customers may even enjoy the visual distraction. And while some customers may prefer reading a magazine, some may prefer a bunch of movie trailers or entertaining commercials.
Your revenue would come from the advertisers. You’d be able to give them specific geographic targeting, as well as some demographic targeting (the customers who go to a Jiffy Lube in East Palo Alto, CA, will be different from the customers who go to a plastic surgeon in New York City, NY, for instance).
Your customers would get paid for hosting these portable flat-panel advertising screens at their locations. This additional income would make this device more attractive than a bunch of waiting room magazines too. A dentist would have to purchase a bunch of magazine subscriptions. But hosting one of these screens would mean extra cash for the dentist. Sound-sensitive environments such as restaurants could turn the volume down (or mute it) while others may want the audio component as well.
The device would just be a flat-panel screen connected to a computer of some kind. If a dummy terminal could be built simply to receive & render web pages & video, that would be even better. The ads could be anything from video to static images to animation. To get the ads, the device would need to be connected to the Internet for real-time transmissions. A dedicated line would be more reliable than a wifi connection. This unfortunately means the customer would need to have Internet access. Not all customers will. Alternatives? I’m not entirely sure yet, but I’m sure some smart person could figure something out (maybe you pay for a cheap dedicated line, maybe you partner with an Internet provider, maybe you build it to receive radio transmissions, I dunno).
Other than device costs, you’d also need to hire a staff of salespeople who’d sell it to local businesses. Signing up franchises and national chains would be great, but some customer types wouldn’t exist in such forms – such as dentists & doctors. There would also be some sunken costs as you attract advertisers and customers from the onset, both of whom need to see a threshold number of the other before committing. Or, perhaps, you eat some of the initial costs and pay customers to host your device while running generic ads until you gain enough traction in the market.
There are a fair number of indirect competitors right now who are offering video screens to businesses, though they generally target bathroom placements. This device could be placed anywhere: bathroom, waiting room, lobby, anywhere. These competitors already have a device, advertisers, and advertising network, however. To make the leap to placing their device anywhere may not be that difficult. Could this idea be more suited for one of them then, as opposed to a brand new company? Maybe. Or, since they’ve been targeting seedy bar bathrooms for so long, are they unable to reach more discreet customers like dentists & doctors? That could be the niche opportunity this business needs.
I do see some legs to this idea, though I’d hate to introduce even more intrusive advertising into this world. Though, to be honest, it would be kinda cool to watch movie trailers while perched upon the porcelain throne of quiet contemplation… Hmmm…
And who likes waiting around and flipping through old copies of Highlights while waiting for their dentist to finish up on a bunch of screaming patients? I’d rather be entertained by a new Apple or Infiniti commercial or something. Wouldn’t you?
Naming a business can be as hard as naming a baby. Well, maybe not AS hard. But it’s still pretty damn hard.
I’ve been reading Seth Godin’s Small is the New Big and came across his collection of riffs on business naming. Fortunately, he blogged about these as well, from as far back as 2003. (Hey, did he just grab blog posts to make his book??)
Here’s what Godin recommends:
A name that is too descriptive could be too limiting. The less it has to do with your industry, the better. International Postal Consultants is too limiting. Starbucks, Nike, & Apple are good.
Use real English words. Axelon & Altus are bad. Jet Blue, Ambient & Amazon are good.
Make sure it’s easy to spell and pronounce. Prius is a bad name because it can be tricky for some people to spell and pronounce.
Don’t obsess over getting a short name just so you can have a short domain name.
Add a descriptive tagline. Like “Lemonpie, the easy way to learn scuba”.
A name should be unique enough to appear in a web search without a lot of competitors and flexible enough to gain a secondary meaning if you wish to expand your brand.
If you’re creating a whole new product or service, give it a whole new name, not an incremental one. Sneakers is better than athletic shoe.
If you have lots of products and services, come up with a clear naming hierarchy, so customers can understand your offerings. Honda, Honda Civic, and Honda Accord are good. Apple, Apple iPod, and Apple Powerbook are bad, because the “i” prefix isn’t consistent or defensible.
Names with generic words like Central, Land, or World are meaningless. They add no value and are difficult to defend.
Created by the socially-conscious Tonic Generation, this for-profit business will remove you from junk mail lists for a one-time fee of $20, or $36 for an extra bundle that includes two CFL light bulbs, a re-usable shopping bag, a t-shirt, and a children’s book. Or you can opt for a do-it-yourself guide that they’ll send you – plus a $1 payment. Not bad!
If you hate junk mail as much as I do, maybe one of these solutions can help. Good luck!