EXAMINE THE NET WAY OF LIFE
by Paul C. Pinderski
The only non-boring thing about the opening Salt Lake City Olympics was a bizarre little techno twist. President George W. Bush was standing with the USA team in the stands during the massive opening ceremony ice show. The camera did a quick pan to his location, and a skater behind him reached over and gave him her cell phone. Naturally, the Prez took the com and spoke for a while with the athlete's caller. It was a rare moment in the Event since it was the only thing spontaneous and unplanned. It also showed the power of being able to communicate anywhere to anyone at any time.
However, People have been getting too addicted to their cells. In the shopping centers, there are people with pained expressions because of tennis elbow since they have a cell constantly to their ear while they shop. They call their spouse or significant-other debit partner and ask whether he/she/it should buy this or that. Hey, how can you describe a item on a cell phone in a crowded store? If it is such an important purchase (really its not it would seem) then get off the weekend sofa and shop with your significant other! But people have now been conditioned to have the cell phone on and in use 24/7.
It is an addiction. But it will never be called one. In Europe and Toyko, teens use their telephones like Game Boy screens, dialing in alpha messages and comments while they wild through the streets. The telcos love it. Message units are message units. They are creating future demand. Try to take away a teen's cell phone; it is like trying to take a raw steak away from a starving tiger.
I turn off my cell constantly. I get enough phone calls as it is on a daily basis. I like the gateway of an answering machine or down time just to catch up. But the addictive personality is a rev speed. It is like the speeding up of the world that started with overnight courier over the five day regular mail delivery; to the use of fax machines over overnight courier; to the instant email over the fax. The new technology sender now expects faster responses. Today, they are looking for instant replies to email. What will be the next step? Hard wiring people's frontal lobes together?
The US Postal service moans at the loss of letter business. The progress of society was cued when paper and ink was available to the masses. The art of correspondence is such an archaic 19th Century footnote in modern times. If the world is a full cycle of events, it would be ironic that the cellular phone masses will slowly turn back the societal clock to the time where oral histories were the norm, and communicating by the written word was merely an inventive idea.
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by Paul C. Pinderski
Parts of America are in a Drought. Nothing more parched than the landscape of internet advertising. As media buyers cull back expenditures on traditional media outlets of radio and television, the banner ad rampage was the first to be cut. Part of the problem is the maturity of the internet ad market. It was immature. There are still disagreements on how viewership should be calculated in the advertising formulas. Old rules of audited circulation of print media do not readily convert in a digital click counter system of web sites.
Certain traditional media outlets began as subscriber based extensions of their print parent, like the Wall Street Journal site. The belief that their content was a valuable commodity lead to early pay-per-view concept so outside advertising was secondary to actual, verified, money paying circulation. Again, a traditional media system transferred to the web.
Hybrids occur in nature. Such in business publications. TheStreet.com is a free site that has various business news stories and commentators geared toward the day traders of old. The model was initially based on web adverts, but management changed its model and split the popular features into its pay-per-subscription site, RealMoney.com. This maturity actually makes some business sense. First, develop a viewer base with free content (that was what spawned the massive growth of the web at the beginning.... free, different, unusual content) then recover the capital costs in a subscription spin-off and take the hard core fan base with you. It's like a local rock and roll band eeking out a cheese sandwich existence playing local school dances until their first single lands them a national record deal and they leave town for the Big Time.
Even in an ad drought, you still have to water the seeds of future success. Some sites have gone to the ancient concept of shareware. For those only accustom to Napsterism, shareware was a process where small software developers would release their programs into the public domain for people to demo. If you liked the program, and were going to use it, the author asked that you pay a fee back to him. It was the honors system. (Yes, probably a taboo subject in current corporate ethics.) So some sites have now gone back to the shareware creedo and asking regular viewers to subsidize or sponsor the site's continuing costs by sending money.
Some sites are just asking for charity like telethon pledges, asking for donations and support through internet pay-account partners. It may be a little more crass, but it has the same general appeal of shareware.
Revenue. Any revenue is good revenue for site operators in these days.
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Don't Touch the Stuff!
by Paul C. Pinderski
It used to be that on Saddle Back Road you could write a wacky concept on the back of a napkin and become a millionaire in a week. Take an old world business model, take away the brick and mortar, and turn it into bytes and bits on the seamless internet frontier and the people would buy in droves.
What were the early morph concepts? Books, flea markets, smokey bars, travel agents and groceries?
As fragile as that wet, ink stained napkin would become, few of the transfer new economy business models can stand an objective, business view: profitability. The gold rush of ideas is over; show me the gold.
Books. Take out the cost of leases, employee clerks, shelf stocking, and profit margins will soar. Amazon.com had the model of being the silent middleman.... take orders and have publishers drop ship to the end customer. Amazon would not have to take possession of anything. It was an order router. Seamless distribution was the net's first virtue. But something happened along the way. Amazon changed into the taking inventories, building warehouses, in essence becoming the largest wholesaler of books in the country. And all that infrastructure costs money, more money than the internet server infrastructure. Then, selling books at a discount to a local brick and mortar bookstore cut profit margins to zero. Then subsidizing the costs of shipping to customers to keep them loyal, well you have negative profit margin growth on the horizon.
Flea markets. eBay found the middleman role when it brought America's attics and garage sales on-line. It was the perfect fit. It never took possession of any item. The honor system applied to buyer and sellers. It was an open system where anyone could place a national classified ad to sell anything to anyone (except the socially illegal white baby, and kidney). This company was the first to show a profit and maintain it. It was not the flea market operator setting up infinite stands of wares to sell; it was the parking lot owner who charged a fee for the others to do the heavy lifting and sales. This concept works, but like Amazon, eBay has started to drift into partnerships with others to take and sell things beyond its main core business.
Bars. You don't have to go to a smokey bar and find companionship. The chat room was an instant avenue to connect with other people. Emails and instant messages are also the way for individuals to communicate quickly and efficiently with friends, family and the odd stranger. AOL rules the roost in subscribers for their connection services. But it is not making any money at it. In fact, it is bleeding Time-Warner cash flow streams dry. The infrastructure, marketing and management costs of AOL are staggering when compared to other B to C operations. AOL has had to paid to wrangle content from outside sources instead of creating its own. Merging with Time-Warner's stable of media content has not turned around this problem by cross-selling or porting paper to AOL's pages.
Travel Agents. Who goes to a travel agent anymore? You can pull up an on-line travel site and book your flight directly from the carrier. Or you can do a priceline and bid for the excess capacity in the travel fields. The priceline model was similar to eBay. The airlines, hotels, and rental car agencies have excess capacity, empty seats, rooms or cars, on any given day. By giving them over to a reseller, the travel industry could make found money with a new breed of discount passenger. The problem lies in the fact that the airlines, hotels and rental agencies are as sophisticated, so they are taking back this excess capacity business in house. And the discounts are not as steep. And the pricelines of the world have to work harder to keep a competitive service that does not deal with three transfers, six hour lay-overs in travel horror story lore. So priceline tried to use its model on other things. Like prepaid gasoline. Just before crude oil spiked, it sounded like a good napkin concept. It was a disaster, and that plan quickly folded when they could not guarantee price or delivery.
Groceries. There are people who hate to shop. There are people who have no time to shop. Hence, the small personal assistant was born. Taking that individual concept and put grocery shopping on the web had some appeal to the haggered, two income homeowner. But operators failed to realize that grocery store margins are less than two percent. The products are parishable. People have habit of tangible interaction with the products. The real store profits on impulse purchases. The shopping experience could never be recreated in cyberspace. So to grab market share, the on-line grocery services did not add-on to the actual costs of goods sold. If you just took a shopping list to the store, bought the list, and added on 15%, then it would be a 15% gross margin less the costs of the delivery man doing the manual labor. You could at least see a profit at the end of the tunnel. But again, for some reason, these web grocers decided that it was better to have the products in house. So they built huge, climate controlled warehouses, with union truckers, docks, butchers and leases. They suddenly were discount warehousers competiting not for convenience of their customers, but with big national players like Sam's Clubs/Walmart. It was turned into a no win situation.
The concurrent lesson that could be learned from these examples is simple. Don't Touch the Stuff! An on-line business with the least amount of old world infrastructure, bricks, mortar, leases, inventory, employees, has the best chance of surviving.
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