by Dana Blankenhorn
Volume IX, No. XLII

This Week's Clue: The Open Source Business Model

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This Week's Clue: The Open Source Business Model
SSP (Shameless Self Promotion)
Best of the Week
The American Diaspora
ZDNet Open Source
Clued-in, Clueless

Dana Recommends The Blankenhorn Effect offers a powerful, positive message for our time. Once you understand how Moore's Law impacts every part of your life, how powerful it is, and how irresistible a force it truly is, you will have the power to predict the future and know how to change it. Buy it today, and make 2004 a better year for yourself, your business, and your family.


For the Week of October 17, 2005

The recent agreement between Google and Sun highlighted a fact that has struck the tech industry in the gut, the effectiveness of the open source business model.

Marc Andreesssen , Bingo Bango Software in Atlanta, and even I are all working along the same path. Ad sales and e-commerce, when properly scaled, can pay for a lot of development. Those development costs can be spread so thinly that people can use powerful tools for literally nothing.

There are strict limits to this, I believe. A lot of entrepreneurs, and venture capitalists, look at the success of Google AdSense, they read about big companies ramping up their online ad spending, and they figure the same stuff they've been doing before will now start making big bucks.

Not really.

There are some key variables I believe will make the difference between success and failure in this space. One of the most important is the value you can derive from each page view.

Raising that value does not mean throwing ever-more-intrusive ads in front of people, or demanding personally identifiable information from each reader you then will share with advertisers.

What it means is making the offers on each page so relevant to the reader's interests that they will proceed down a sales funnel. How far will they go? That's where I part company with the "experts" in terms of strategy.

I'm proposing we think of three key elements in raising the per-page value of content:

  • Permission
  • Targeting
  • Partnership

Let's take them one at a time.


The way you increase the permission in your relationship with an audience member is through seduction, not pitching. When someone is on your page, you have page permission to place ads in front of that person. Building that relationship into a transaction requires that you earn trust. That's the site manager's responsibility. That's where the value comes from.

How do you do this? Editorial credibility is vital. By that I mean be what you're expected to be. Treat your reader like a grownup (especially if they're a child). Be dedicated to your subject, to enhancing your reader's knowledge, to answering their specific questions.

Readers understand that they are part of a market. When they're in your market, they expect to see offers from products and services related to the content you're presenting. These are the products and services relevant to their interests as well. Take an editorial interest in giving your readers the highest-quality advertising, the very best offers you can.


There's a lot you can learn from weblogs. There's a lot you can learn from asking questions of your readers. You can do a lot of targeting based on the content in your editorial.

Targeting means more than identifying readers to advertisers, however. It also means identifying advertisers to readers. When you recommend a product or service you know is good, track the relationship through the editorial, then go to the advertiser and offer ways to enhance that relationship. It could mean an ad. It could mean information. It could mean your providing commerce services, or e-mail. Your job is to become the conduit between your reader's desires and the market's possibilities.


This may be my most controversial point, because it requires that online publishers change their attitudes toward advertisers.

Advertisers do more than push offers on readers. They are your commerce partners. Your targeting should reveal the best possible products and services for your customers. But these companies may not know how to transfer their Unique Selling Propositions into the online realm.

Tell them. Show them. Interact with your readers and your advertisers to make the transaction of business easier on both sides. We do this routinely with readers. In the editorial business we say that we advocate their interests, and we assume the ad guys are advocating the interests of their customers as well.

But those interests are different. Your best advertisers may not be the best choices for your best customers. What do you do then?

You can do two things. You can turn your advertisers into better prospects for your readers. You can also target those advertisers your readers wind up preferring, and use your own market knowledge to find even-better solutions to readers' problems.

The job of publishing has always been to organize and advocate for markets or interests. This has not changed. But the online medium offers new possibilities for intimacy, between buyers and sellers. The more intimacy you create, the more valuable all your pages become. Master these techniques of Permission, Targeting and Partnership, raise the value of your pages over that of the competition, without hosing your readers, and you'll find you can make a great living with a small audience, then scale that audience into a great business.


Shameless Self-Promotion

I've got a new job. I'm now editor of Atlanta, a Web start-up aimed at building a community Web platform with a real business model. I'm also all alone in writing the Open Source Blog for ZDNet. (When this started there were three of us.)

My last non-fiction book, "The Blankenhorn Effect" won the Computer/Internet category in the 2003 Independent Publisher (IPPY) awards. Write me for a PDF copy of my latest novel, "Baptists are for Dunking."

On my Mooreslore blog I've written a new novel, "The Chinese Century." It's a story told in real-time, with real characters, but entirely fictional, dealing with the consequences of the falling dollar. I'm beginning a sequal, "American Diaspora," exploring the themes of the first book but with more fictional characters. It's a true alternate history, but set in the present day.

You are encouraged to forward this newsletter widely. And if you have trouble subscribing let me know. Remember: it's journalism that keeps the Clues coming...


Best of the Week

Cramer Gets Prechterized

By that, I mean he sounded a warning as any ever uttered by Robert Prechter, the Elliott Wave theorist I wrote about earlier this week.

The Secret Behind the Quick Sales

Internet businesses are easy to get into, easy to compete with, easy to replace.

Thoughts on Web 2.0

What is it? It's a database.

Blogging's AOL Moment

Calacanis' company is probably the biggest in this space, but $25 million is less than the cost of a single good magazine title.

Gas Rationing

That's the issue no one will approach. No one will touch it. Yet it has to be touched. And now.

Should Eric Schmidt Lead Google?

wrote something today suggesting that Dr. Eric Schmidt leave Google. I was told, by my editor, that it was over-the-top. "A series of cheap swipes," "rather than a reasoned case." Maybe it was.

Super Bear

I've always had a soft spot for Gainesville, Georgia economic analyst Robert Prechter.

More on the Internet Breakup

Discussion of the possible DNS fork by the UN or ITU continues on Dave Farber's always interesting Interesting People list. (And if Dave Coursey doesn't like it, he can leave.)

Mesh Era Finally Arrives

A mesh, in which all devices on a network are connected to all other devices, finally has a hockey-stick chart.

Music Industry Profits Down

Markets cannot work under coercion. The decision to purchase a good must be a free choice, or else you don't have a market.


The American Diaspora

Table of Contents

ZDNet Open Source

Is Your Open Source Project Ready For the Daylight Savings Time Fix?

Web 2.0 and Open Source

Is Eric Schmidt Still the Grownup Google Needs?

Addition by Subtraction for Google and Sun

A Coming Google Sponsorship?

Has Google Launched the Age of Open Source Communication?

The Open Source Consolidation Phase is Beginning


Clued-in, Clueless

Clued-in was Jason Calacanis, in selling Weblogsinc for $25 million.

Clueless was AOL, unless they know how to lock Jason up for the long haul.


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