Doesn't it feel that the clock has turned back from 1999 to 1995? We've gone from too much money chasing too few ideas to too many ideas chasing too little money.
It's a boom-and-bust cycle much like that of the old West. The world is filled with cyber ghost towns. The only difference is these won't make good tourist attractions (with latte bars) a century from now.
With the idea of funding fading into memory, there are still some great ideas that haven't yet been tried. This week I collected a few:
Korean Grocery - You organize a small enterprise that can find the very best gourmet items both on and off the Web. You warehouse the latter, and link to the former. Next, you look for small hole-in-the-wall neighborhood groceries (in Atlanta most are run by Koreans, selling lottery tickets, cigarettes, and fortified wine like MD 20/20) to act as affiliates.
Next, you spend money on cheap banners to draw traffic, and measure that advertising by the registrations you collect. Each registrant will input their street address and try to find an affiliate near them. Each registrant can then have their order shipped to the affiliate (remember, it's perishable) and stored in their fridge. They pick it up at their convenience or arrange for delivery (another profit opportunity for the affiliate).
Here, you see, computers are doing what they do best. They're linking good customers and local stores based on inventory the stores don't have. They're not warehousing and shipping - they're networking.
Next you train the stores to ask the customers what other things they want, things they might stock from their own suppliers. (You never have skim milk - can you get some?) The affiliates get a small cut over what they hold and store, but they also get the training to upgrade their services to the community. You can also sell them their own little Web sites.
Local, Local Newsletters - I'm talking here about e-mail newsletters that go just to neighborhoods. I'm talking about news sources that are restricted to a single zip code. Real estate transactions, police reports, new business start-ups and the court docket can be the heart of this kind of report. Since it's truly customized you can charge for it. You add a little editorial to the front of it, you sell ads on it (because you can prove who is reading it) and eventually you build a chain.
Personal Gofer - This is similar to the Korean grocery, but it's designed for storage centers. Have someone at each center running errands for the center's customers with a specific fee per-errand. Offer the service through a Web site, and correspond via e-mail. The goods can be left at the center and picked up at the customer's convenience. This keeps a staff at the center (improving security) and provides an additional service to the customer. This also increases the number of times the customer comes to the center. For an additional fee, of course, the gofer runs orders over to the customer's home or office. Over time you expand the range of services available to trusted customers.
The key to all these ideas (feel free to add your own) is that they can be started on a minimal investment, they are designed to become profitable quickly, and they can then be replicated easily. This solves the scaling issue that stores like Pets.Com and Webvan never figured out. Scaling should be done the way Wal-Mart or Petsmart did it, by doing it once, doing it right, then copying the formula throughout a market, and market-by-market.
SSP (Shameless Self-Promotion)
The draft is done. "Living on the Internet: How to Make Money, Live Right, and Fight For the 21st Century" is now in the hands of the folks at eBookAgent , which is arranging for electronic distribution. I'm hoping to add a monthly newsletter as an up-sell, available free to all buyers of the book. Your testimonials would be appreciated. Drop me a note if you need a sample chapter first .
You can join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive.Com. You can also read me at ClickZ , B2B, at Boardwatch, ISP Executive, Sitepoint and the new (paid) version of WorkZ. More deals are being sought. Remember that it's journalism that keeps the Clues coming...
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Takes on the News
Record Industry Still Clueless
Driving large hunks of the Internet economy underground without providing a viable, legal alternative is the height of Cluelessness.
That's what the recording industry continues to do. Its latest "efforts," Pressplay and Musicnet, will allow for some downloads, but won't allow users to transfer those downloads to CDs or portable players. CDs bought in stores increasingly (and secretly) include the same anti-copying technology. Is it any wonder that sales of recorded music are down?
These technologies violate fair use, as practiced by listeners over decades. They do it in the name of protecting against theft. But when you assume your buyers are all thieves, what happens is that they learn to act like thieves. They stop buying your product, and they start looking for uncontrolled versions of it in the underground economy.
I actually passed a table-top "store" in my local ghetto last weekend selling pirated DVDs of "Rush Hour 2" the day after the movie opened in theaters. The bad guys are more sophisticated, yes, but it's the hard-line attitude of the copyright industries that give them their market.
Despite immense efforts by the industry, and their attempts to forcibly enlist ISPs as copyright police, that underground economy continues to grow. Suppliers are becoming more sophisticated. Here's what is coming to a college dorm near you this fall. A single sophisticated user goes to the online "swap party" with a load of "orders" from "friends," then sends the results as e-mail attachments or just burns them onto CDs. In this way ordinary college students are being systematically turned into hardened criminals by the copyright industries.
The solution today remains what it was. Find a way to give people the music they want, with fair use protected, at a price people are willing to pay. Negotiate with the market instead of running to the police. If the industry fails to do this, then musicians have to do it themselves.
The Unasked Question in the AOL-Microsoft Wars
Here's a question that isn't asked in the breathless coverage of Microsoft's coming Windows XP release. Why should any ISP - whether that of Microsoft, AOL, or Earthlink, be able to buy or be given favored access on an operating system desktop?
How can that desktop be seen as "property" and "proprietary" when PC buyers have no choices in the operating system, as is now the case? If it's a utility, and a requirement, shouldn't everyone be allowed into it, as they were just a few years ago? If they're not, shouldn't access be regulated? Is allowing AOL access to the desktop, in collusion with hardware companies, really a "choice?"
As was the case last week in our "clued-in" item about Judge Rosenbaum , so it should be now. It's the unasked questions that could be the most important, and the unchallenged assumptions that are the most dangerous.
A profile in the San Jose Mercury News shows that our fears about Karl Auerbach, a member of the ICANN board, are being realized.
"It's convenient for him to cast himself as the gadfly and critic of the board," said ICANN President M. Stuart Lynn dismissively. Auerbach, who was recently "laid-off" from a job at Cisco Systems (did anyone ask why, and was it really a lay-off?) is the only member of the ICANN board who comes to his job with any real democratic legitimacy. (Dr. Lynn, as a member of the board he's your boss.) Auerbach was elected as a member for North America last year, and his race had the largest number of votes, representing the largest number of Internet users. The "elected" representatives from Asia and Africa who oppose him drew just a few hundred votes each - Auerbach's support was numbered in the tens of thousands, people who jumped through excruciating hoops erected in their path by ICANN to keep them out.
The alternative to Auerbach's democratization is rule by corporations and their attorneys. There is a term for government of, by, and for big business, a corporate state that suppresses dissent. Those who dismiss Karl Auerbach (http://www.cavebear.com) as a "gadfly" need to be wary of having the label applied to them and having it stick.
We've seen increased moves by the Internet's best and brightest into a growing underground of hacking, file sharing, and ignoring of stupid laws , like the recent move in South Carolina to forcibly enlist computer repairmen in the hunt for child pornographers. (Hey, why not force them to inspect hard drives for "pirated" MP3 files on pain of imprisonment - it's a very short step.)
The real problem in the Internet economy is that governments - local, state, national and corporate - are attempting to impose local controls without soliciting democratic input on what should be international norms. More and more people are being forced underground, in whole or in part, and it's a short step from oppressing easily taken actions to suppressing ideas. Without universal principles of what governments cannot do then the people have no guaranteed rights, and are likely to become enemies of all government. Without democratic processes in which all power is checked and balanced, there is no way to adjust those principles and no reason to respect them. Driving parts of the economy underground doesn't help anyone - least of all the corporations whose existence depends upon growth, stability and respect (not fear, respect) for law.
Karl Auerbach is not a gadfly. He's the canary in the birdcage, down in the mine. And he's singing at the top of his lungs. Is anybody there? Does anybody care? Does anybody see what I see?
Clued-in is Richard Smith of the Privacy Foundation. The fact that no major media has taken on the Skylarov scandal shows just how brain-dead they've become, and the next step past brain-dead is irrelevant.
Clueless is anyone who believes Websense' self-serving garbage . This is a censorware maker trying to justify itself with a claim that "U.S. companies lose $63 billion a year in lost productivity due to the Net." The recovery doesn't really start until Websense goes the way of Webvan.
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