business models Archives - Florida Strategic Consulting

Google Creates Open Marketplace for Display Ads

Posted on September 18, 2009 by Alex M. Hochberger, MBA

In what might be huge news, Google is opening the DoubleClick Ad Exchange as an open marketplace. The Internet has destroyed middlemen and process where ever it has moved, devastating travel agencies, newspapers, recruiters, and in some markets, realtors. It has been market-by-market, but the value of exclusive information has been destroyed as information has become publicly available.

One exception, media buying. For reasons that will perhaps never be clear, purchasing banner ads on websites doesn’t follow the open marketplace of the rest of the web, but the rather strange world of media buyers and sellers, with their high commission rates and huge selling costs. I understand why $10 million ad campaigns might require some sales finesse and price breaks, I don’t understand why I can’t buy 30 second spots on a local independent station in the middle of the night without knowing a salesman and creating an account. I really don’t know why buying banner ads also seems so convoluted.

When I have done business hosting ads and buying them, I’ve found the results pretty decent if you are targeted. I believe that they are much cheaper than Text Ads for business reasons… a marketer with a credit card can buy Text Ads, it seems like you need to spend time talking to a salesman to do banners. Given how many independent marketers are moonlighting on the web, it’s insane to have a medium only available from 9 AM EST to 5 PM PST, when the search engines will let me buy spots at 4 AM.

AIM vs. Twitter: Why didn’t AIM Become the Center of the Social Web?

Posted on September 11, 2009 by Alex M. Hochberger, MBA

When my wife and I were discussing social media, and I mentioned that at Third Solutions we use Skype for IM, and at ASG Group we were using Twitter, she asked me if we had gotten old? When I arrived at MIT in 1997, I ran ICQ for friends from home + Zephyr for talking to classmates, the next year the freshmen showed up with big lists of AIM friends, and by the time I left school, ICQ and Zephyr were basically dead and AIM dominated communication.

Here is it, over 10 years later, and I still use AIM as a constant business communication tool, but it certainly lacks any hype or excitement. Gmail accounts form the basis of OpenID, yet AOL with 20 years of AOL accounts and 10-15 years of AIM accounts couldn’t make themselves the login option of choice for the community web or the Web 2.0 world.

An old AOL hand asks, “Could AIM Have Been Twitter?” AOL fought third party integration, mostly because Microsoft was at the time masters of embrace and extend, and the only on-ramp was the weird open access AOL published for the Tik client that we ran on Unix, with limited access. While AOL had the users, they didn’t have the culture of centrality. Openness may have helped, but the open-IM groups pushed by Yahoo and MSN fizzled, Jabber went nowhere, and even though Google via Google Chat supports Jabber, Facebook chat seems more vigorous.

I think that AOL could have done a lot with their platform. But the corporate culture, more than the business around technology, prevented them from being cool. Everything AOL bought saw talent flee to start-ups and generally fall apart. Other than picking up Time Warner for a steal, they weren’t able to use their early lead in the Internet, perhaps because of their Internet for the Masses reputation, they couldn’t be “cool” to the technologists, so even if the masses used AIM, nobody was building upon AIM. That, more than AOL’s internal walled garden mentality, is why AIM didn’t become Twitter.

Government Matching Inventors with Manufacturers

Posted on September 10, 2009September 10, 2009 by Alex M. Hochberger, MBA

Three cheers for some smart governmental policy. Markets do well where there is perfect, or near perfect, information, and limited barriers to entry. Markets do poorly where there are barriers to entry, particularly if they are information based. Technology, IT in particularly, has helped shrink businesses by eliminating layers of management because you no longer need a 6:1 reporting ratio because of paper limitation. Further, Just In Time EVERYTHING, manufacturing, wholesaling, inventory, etc., helps keeps companies lean, just buying things as needed in an open marketplace.

One area where the market failed to make connections was in the manufacturing of products. Contract manufacturing seemed popular with large companies, but there didn’t ever seem to be options for small businesses. Strangely, every entrepreneur I know who made a product made it in China, not because of the cost differential (shipping and monitoring eats it up on small lines) but just because they could get it done.

Department of Commerce’s Manufacturing Extension Partnership helped launch Planet Eureka!, the innovation marketplace. Maybe we’ll be able to get one of my wife’s ideas to market this time around. Thanks to CNN Money for pointing me in this direction, you can read the artile that I read, “What’s your idea worth?”

Retro Small Business Financing – Customer Funding

Posted on September 9, 2009 by Alex M. Hochberger, MBA

In a world of complicated finance, the idea of building a business without capital, raising money from your customers seemed expensive and retro. Although mentioned as an example in every business text book, in reality, entrepreneurs have focused on debt financing or outside investors rather than looking to their customers.

With the credit crunch and housing collapse eliminating many small business loans and home equity loans as a source of business capital, many entrepreneurs are returning to the historic source of capital, their customers. Money magazine shares the anecdotes of several business owners, owners who have sold stock, pre-sold gift certificates, and otherwise took action to raise capital from their current or potential customers, both raising capital cheaply and increasing customer loyalty.

In some ways, however, this capital is cheap, and in other ways it is very expensive. The capital is cheap in that it lacks personal guarantees, protecting the downside, and may not have the warrants and other “teeth” that angels and VCs may want. However, selling $1,500 in gift certificates for $1,000 to raise money is a 50% rate of return and will likely be redeemed within 3 months, potentially charging you a 200% rate of interest. If that customer would have spent $1,500 with you anyway, that’s real cost in opportunity cost. To the restaurant owner, if they run at 50% margins, that $1,500 costs them $750, so from a cash flow point of view, the money is cheap. As most small business owners will remind you, cash is king, and cash flow matters a lot more than the traditional finance metrics, because cash means survival. The Fortune 500 finance guy is worried about NPV (Net Present Value), but the local coffee shop needs to pay the rent and cover payroll.

As a rule, I open my business bank account with the first check from a customer. If I invest in the business, it comes later, but by always opening the account with a customer check, it serves as a reminder that you aren’t in business until you have a paying customer.

Internet Upscale Success – Net a Porter Hits Successful Women

Posted on September 8, 2009 by Alex M. Hochberger, MBA

After spending so much time in sub-prime finance where most of the SEO/Internet Marketing Industry lives, and helping eCommerce businesses in a race to the bottom of price and service, it’s nice to know that the premium industry is surviving and even thriving in this space. Fortune Magazine had a great article on the success of Net a Porter, selling high end clothing to wealthy but time strapped women who was a virtual fashion magazine, think of it as Vogue that delivers the clothing to you. Much of the online fashion buzz has been for companies with rapid fire sales like Rue La La, which lets designers dump excess inventory to those with free time… young professionals who can sit at their office computer waiting for the 15 minute window where the good stuff all goes when a boutique opens.

Net-a-Porter is offering a mobile and web experience, letting a busy professional woman that is on the go have the latest fashions despite an industry that ignores them. The successful women that I know have more disposable income than time, and the boutique industry still targets the trophy wives of the idle rich. A female executive working 80 hour weeks as a dealmaker simply doesn’t have the time that the wife of her male counterpart does to go and be waiting on in a fancy boutique, but there is no reason that she’s can’t be properly dressed.

It’s nice to see that in a race to the bottom, a company focused on service found a profitable niche.

Why 140 Characters works for Twitter

Posted on September 1, 2009September 1, 2009 by Alex M. Hochberger, MBA

A common exercise in demonstrating the human mind is give people a broad assignment, like “write something funny,” which isn’t something that most people can do without preparation. A set of guidelines (like write a Limerick beginning with, “There once was a boy from Kentucky”) makes writing on the spot much easier.

Similarly, Twitter’s 140 Character Limitation actually makes the site more expressive. I love the limitation inspired by SMS, which makes it a great “on the go” tool. However, the internal language of Retweets (RT), Mentions (@), Hashtags (#category), plus URLs somewhat makes a mockery of the system.

I’ve expressed my issue with URL shortening, it “breaks” the web which at its core is linking to valuable resources. The redirects have always made spidering the web harder, tracking links more difficult, and otherwise interfered with common usage of the Internet. They create the risk of link rot, and in the case of Twitter, undermine the importance of link anchor text.

If I publish the name of my blog entries on my Twitter feed, they clearly should be clickable, but instead, a shortened URL will appear in the Twitter entry to conserve “characters.” Given the ability to encode links within hypertext, it seems rather silly to “use characters” for the link, encouraging one to use a third party “shortening” service.

However, if in the middle of a Twitter discussion, I want to express a real idea, the “hypertext” approach would be to publish it to the web and link over, creating a permanent record in an accessible manner. In our new Web 2.0 world, we use a service like TwitLonger, which essentially lets me upload a stream of text and make it available via Twitter. I guess it’s the same thing, but now it’s floating out there on someone else’s system, someone who may or may not figure out how to make any revenue off this service.

Limitations can encourage creativity. When I ran an SEO shop, I gave relatively strict requirements, which let me team mass produce content, while a broader range of action would have people simply staring at the screen.

Are Single Revenue Media Companies Dead?

Posted on July 31, 2009 by Alex M. Hochberger, MBA

That subject line caught my eye the other day. As someone who started with a programming shop turned SEO shop, the idea of a single revenue media company makes sense to me. You focus on what you know and do it well. Television stations sell ad spots, newspapers sell ads, and websites sell ad spaces, whether they do it CPM or CPC.

Should companies need to diversify? In my mind, when I’m representing a company, I want to have plenty of places to put their ads. However, the mega channel companies usually suck at all of them as opposed to the single channel companies. Many companies go to the Mega companies because they lack a dedicated media buyer in house, and hate the idea of hiring an agency. But this to me seems like a great area for agencies to add value, and what is a multi-channel company other than a agency + series of channel companies.

Somewhere, the company is grabbing the agency model, because they are paying their customer service people. If they make less than agencies do, it’s because they do a worse job, just pushing you to channels that don’t do a good job.

The whipsaw of the market hurts the undiversified, but if you are really good at what you do, if you manage to handle the downswings, you should do better than if you are mediocre at everything.