For the Week of June 24, 2002
An old friend called last week. He's a former (and future) entrepreneur, but just now he's taken a job selling some technology gizmo to OEMs.
"What's the big idea?" he asked. My mind wandered the waterfront for him, from Moore's Law to the telecomm collapse to Hollywood's war on its customers to the economy to the political situation.
Each time he called me back to Earth. "The big idea," he demanded. "What's the one concept I can use to make a ton of money, to build a huge business that will change the world?" He described some of his own concepts, which I rejected, one by one.
Finally, the word hit me. "Services," I said, like the man in "The Graduate" said the word "plastics" to Dustin Hoffman so many years ago . "Voice is a service, video is a service, software is a service. There's no such thing as phone service or Internet service or application service - it's just service.
"Find a service people find valuable, much more valuable than its cost of creation. Find a way to get your money out in three years, because your technology will become obsolete. Then market the heck out of it, but keep your eye focused on the concept of valuable service."
Pretty thin gruel, my friend replied. Couldn't I be more specific?
After hanging up I thought a little harder. Perhaps I could be.
There are all sorts of services. There are video, audio, and software services. There are database and game services. There are news, article, and book services. There are content and market services.
How do you make money on them?
Well, it's not going to be by getting those services to me, I said, as it was for Ted Turner , David Sarnoff , or Theodore Vail. In a world where bandwidth is ubiquitous, it's also free. No single pipe can dominate. There will be broadcasters, licensed wireless, unlicensed wireless, cable, phone, satellite, and power line players (plus their re-sellers), all looking to access customers on either end of every type of pipe. That competition will drive prices to near-zero, for hunks of bandwidth we now think of as very, very expensive. Moore's Law will apply to bandwidth. Bandwidth, by itself, is not a service.
Instead, a way must be found to combine editorial and marketing functions, to identify those creative products that might find an audience, then define and sell those products to those audiences. The smaller the audience, the more timely the service, the higher the initial price, but eventually you offer it to everyone at a market-clearing price, which usually ends up being free (advertising supported, of course).
The job is like that of a broker, I concluded. A content broker. In the book business, you decide which book-length projects might sell, give the author the best possible deal, and find a way to reach each book's maximum audience until the book winds up on the remainder shelf. So many, many authors (like me) find ourselves with great projects but no way to reach that portion of the audience who might pay us for our work. Thus, we give it away and even then it doesn't reach the people who can use it.
It's a problem of business models. And it exists in every medium, as the 20th century defines media. How can a musician find his audience without selling his soul? How can someone with a video camera know if they've got the next Zapruder film? It's not just finding the hot voices for the mass market, but the key voices for all those miniature markets that are developing every day.
Some of it will be done by hand, some by technology, and as each process becomes regularized hands will pass it to software, then chips and networks. That's how we'll grow productivity in the 21st century. It won't just be in making stuff that we'll make our way, but in the whole process of making markets.
The 1990s saw the creation of all sorts of commodity markets, which eventually were corrupted. But the markets themselves - for bandwidth, paper, energy, steel, rail capacity, etc. etc. etc. - those markets were real. What's needed, in all these markets, is more transparency, more honest brokers who can go to both sides of every kind of information transaction, win their trust, and get them just what they want, at a price that's fair to both sides.
Want to make a fortune for yourself? Make just such a market, in any kind of medium - print, Web, audio, video, software, or in tangible goods. Then replicate that market-making function across other, related industries. You win by automating that process as much as possible, driving out costs, passing on the savings, and expanding into ever-smaller niches, where information value is highest and audience size is smallest. The winners will be those who offer the best deal to both sellers and buyers.
Don't think of it as journalism, or media, or entertainment, or recording, or software, or services or plastics. Don't even think of it as selling and marketing. What you want to be, my friend, is simply an honest broker. Emphasis on the word honest.
SSP (Shameless Self-Promotion)
A new client asked me recently why Madison Avenue isn't falling all over me. I write technology stuff that ordinary people understand. I also write it on-deadline, on-demand. I don't know, I responded. I just need more of you to click here, I guess.
Show how Clued-in you are by downloading the animated .gif file on the upper-left side of our home page, and copying it onto your own Web site. It shows you want your friends and business partners to get a Clue too. (Clicking directly on the graphic leads to our subscription page.)
Want a really good read? You'll find it in "Boom, Bust & Beyond: The Best of Dana Blankenhorn," now available for purchase at DanaBlankenhorn.Com. You can also order my novel, "The Time Mirror," at the same location. The Print on Demand version of "Living on the Internet" is available
at BookSurge.Com, for $29.99, the PDF
version for just $7.99.
I still write for Boardwatch and BtoB. You can find my old ClickZ columns here (write and demand they hire me back.)
Remember: it's journalism that keeps the Clues coming...
People are always asking me, what's the fastest route to Internet success? I tell them it's Rob Frankel.
You don't have to be rich to get the benefits of Rob's wisdom on branding and marketing for the Internet Age. Just buy a few of his books, e-books or tapes (http://www.RobFrankel.com/store) - you'll see what I'm talking about.
But if you have a real business, and it's got a little budget, and you want to make that budget count for something real, then what you really need is I-Legions, the new Frankel service that generates real revenue from your stagnant user base.
We're talking dollars in your pocket, people. Check it out. Why should the investment bankers and crooked CEOs make all the money?
Takes on the News
Diller's Internet Strategy
Barry Diller's Internet strategy has always been clear. Avoid competition at all costs.
How do you do that on the Internet? You do it by buying only those assets that have, through binding legal agreements, exclusivity within their channels. Companies such as Ticketmaster and QVC have it - CitySearch is likely to be cut to nothing (if it hasn't been already) because it doesn't have it. Expedia has the next-best-thing - an oligopoly shared with just a few other companies. If you don't have a guaranteed market, at least have guaranteed market share.
You can see the strategy in action with this story. Diller, who has bragged he has $1 billion to spend on Internet acquisitions, is buying a European site that does what his Ticketmaster company does in the U.S. If you want to buy a concert ticket online, you can only go through him. That's the way he wants it - legally binding monopolies (or oligopolies). You pay what he demands, and so does the seller. It doesn't matter if his site sucks, if it frustrates incoming links, if it's filled with ads - you have no choice and that's how he likes it.
Will it work? It's better than what others have come up with in the competitive market, and hardly anyone has succeeded in copying the strategy (although they all want to). Time, of course, loves a hero, and only time will tell. If he's real, he's a legend from heaven. If he ain't he was sent here from hell....
Look for other, similar moves from Diller, and look for his rivals to attempt to copy him. That's really what the efforts at re-monopolization on access and software copyrights are all about. Force people to buy from you, at your price, or they have to go without. No, it's not capitalism. But for Diller it works.
That's Not Just a Dream
That's me in the corner. That's me in the spotlight, losing my religion.
But that's not just a dream. Jeff Madrick, one of those doom-and-gloom lefties who give liberalism a bad name, now claims that the boom of the 1990s was pure phony-baloney. (He's notorious for pretending prosperity never happened in books like "The End of Affluence"). Why fools like this get chairs at Harvard, frankly, boggles my mind. (Actually, the reason is he follows the forms of his chosen bureaucracy, like a good little soldier (or Pointy-Headed Boss).) My point is that Madrick is part of a self-flagellating leftist establishment that keeps right-wing wingnuts in power. He should be squeegeeing cars for quarters, not sipping sherry at the club.
Madrick's latest piece of academic malpractice falls on its face in less time than it takes to summarize it. The 1929 stock market crash doesn't mean radio, movies, and punch card systems weren't real. The collapse of the market in the early 70s didn't mean Polaroid, Xerox and their ilk weren't real. Did the bear market of the early 1990s mean that biotech wasn't real? We live more than twice as long as 100 years ago, we're better educated, more comfortable - our living standards are higher in every way. There's a reason. It's called progress.
As James Surowiecki notes in Wired, and as I wrote back in 1998, the extent of the Internet Boom was based in part on its succeeding a number of other technologies to the fore (like multimedia), meaning stock prices had been rising steadily for a half-decade before the Web was spun. Given how short the bust was after the 1987 crash, and how far the market moved past its highs, we had a situation in the late 1990s where the market hadn't fallen decisively within the working memory of most traders, and most investors.
But the collapse of 2000, which continues today, doesn't negate the productivity gains of the Internet, gains which are still coming. Only a very young fool indeed would ignore the gains of the Web and universal connectivity (as opposed to the bulletin boards, proprietary networks and intermittent connectivity that we had in the early 1990s).
The claim that there was no "New Economy," in other words, is just as bogus, and has the same cause, as the claims that created the Internet Bubble. It's a lack of memory, and "analysts" who ignore history. Harvard is endorsing the same ignorance it attacks here, at the moment it attacks it.
It is long past time that academic institutions engaged in honest debate throw-off dishonest debaters like James Madrick. Give me the chair, and toss Madrick into the gutter with Marx, John L. Lewis, and the other Luddites.
Real Casualties in Internet Anonymity War
The "War on Terror" has placed U.S. policymakers squarely on the side of controlling Internet access and destroying Internet anonymity.
This puts us on the side of the Chinese Communists, who are far ahead of us in fighting this new war. The untold story of the recent Chinese "crackdown" on "Internet cafes" is how many of them have gone underground and how people are now dying - really dying, not cyber-dying - in their efforts to use Internet resources anonymously.
The Internet is the greatest tool ever created for fighting hierarchical power structures. It is the enemy of all tyrannies over the mind of man. If Internet anonymity were impossible do you think the women of Iran would be distributing Weblogs describing their real problems today? That is enormously powerful, empowering stuff.
Understand why this medium matters. It doesn't matter so you can become rich. It matters so the world can become free.
Clued-in is C|Net's paid games service. Now, define other niches where paid tiers can be worthwhile without taking stuff off your public site.
Clueless is the move toward a new national "broadband strategy", consisting of re-monopolizing wired access and subsidizing the monopolies. It's bi-partisan nonsense, but it's still nonsense.
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