Wednesday, November 22, 2006

Case Study: The Business behind the Blog

During the Internet boom of the 90's, we saw the modern equivelant of the Gold Rush. People desparately wanted a piece of the pie. Companies with no profits were cashing out every day with big time IPOs. I lived in NYC at the time and it truly was exciting to be right in the middle of this whirlwind.

Today, we are seeing the 2nd Gold Rush aka web 2.0. Google and Yahoo are spending literally billions acquiring companies. Of course, for every YouTube or Digg, there are thousands of websites that struggle to make money or get noticed by the general public.
One of the more interesting technologies that has evolved in recent years is the blog. If you don't know what a blog is then you have been living under a rock because it seems like everyone has one these days. People have also discovered that a blog can be a pretty decent way to make money.

Let's take a closer look at one of the more successful blogs out there, TechCrunch. This blog was founded in 2005 by Michael Arrington and over 1 million people read this blog on a monthly basis.

Techcrunch focuses on profiling and reviewing internet companies and new startups in the web 2.0 space. He has a team of writers on staff to help write articles. I am an avid reader of TechCrunch. Content is updated multiple times daily which is critical to drawing your audience back to the site time and time again.

So, what's special about TechCrunch? Well, other than the fact that millions of people find their articles interesting, I submit that TechCrunch is based upon sound and proven business principles.

The recipe for a successul business is relatively simple but for some reason most people overlook the basics. The ultimate key to having a successful business is to provide a product or service that people want.

This is why I like TechCrunch - their niche appeals to a very wide audience while still being a niche. Ultimately, it's a numbers game. Unless you sell a product with a very high price tag, you have to reach a wide audience.

How does TechCrunch make money? Like any other good blogging site, they rely on advertising. They rely on multiple sources for advertising (diversity is always a good thing). Because this is a popular site, TechCrunch has some options that aren't available to smaller sites.

In the top right hand corner of their site, they sell sponsored links. I did some research and a spot in this section costs $10k a month. They only allow 6 sponsored links at any given time. Now, you do the math...from that 1 source alone, this site is generating a very nice revenue stream. What would you do to be able to sell an ad on your site for $10/month?

So, what's their secret? It's been said many time but content ultimately is king. TechCrunch provides quality content that is compelling for its users. Arrington has a lot of contacts in the press and the business community which has certainly helped with the site's popularity. However, without high quality content, none of that would matter.

Making money online is all about driving traffic to your website. While there are many tips and tricks on how to do this, nothing is more powerful than having good content.

Tuesday, November 21, 2006

The Relevancy of Apple

If you have never read about the early days of Microsoft, I would strongly encourage you to do so. If a fascinating story and the world’s largest software company exists today largely based upon a single bad decision from IBM (another story altogether). Back in the early 90’s, I had a Macintosh just like many people at the time. The Mac was based upon proprietary hardware and was thus more expensive than the IBM PCs at the time.

This decision by Apple proved to be costly as Microsoft ended up dominating the market for PCs. For most people, Apple became irrelevant. There were some niche markets where the Mac dominated like publishing and graphic design but for most of the world, a PC running Windows was the only choice.

Fast forward several years… after years of listening to tapes via a Sony Walkman, I learned about a new gadget that could play digital music. I’m a gadget guy and I jumped at the chance to pick up one of the first generation MP3 players. Quite simply, it was terrible. The device was clunky and the software was abysmal. The market for MP3 players soon explored however with no clear dominant leader.

Enter the iPod – The Apple iPod simply put made Apple relevant once again. This story should be required reading for anyone studying business at a university or business school. They managed to capture 75% of a fragmented market but more importantly, Apple managed to make the iPod cool.

You just can’t place a value on this. The iPod did for digital music what Google did for search. Heck, I even went out and bought one simply because of all the buzz. The story gets better though. Apple now reports that the iPod is driving sales of Macintosh computers. Guess where most people go to buy their iPod btw? They go to an Apple store. This is unbelievable in an age where you can buy something with 2 clicks of your mouse while sitting at a desk in your own home.

From the device to the online store to the purchasing experience, Apple has somehow managed to get just about everything right with this product. When I bought my Ipod, there was a table at the store piled high with boxes. I grabbed the one I wanted and a clerk was standing there with a handheld device. He swiped my credit card and they emailed me a receipt. Put box in bag and out the door I went. This was at Christmas time when going to a retail store is like being in a war zone. No lines and more importantly no hassle. No other retailer has managed to implement this process in a seamless manner.

I use my Nano primarily for running. It has no moving parts so it is perfect for this type of activity. A while back, Apple and Nike worked together to create the Nike Sport Kit. It plugs into an iPod and generates useful information that runners care about. It’s simple, cheap and just works. The beauty of this device is that if I didn’t already have a digital music player, I would probably have bought an iPod for this additional functionality. Of course, Nike now has a new excuse for people to buy new shoes, special shirts and other assorted accessories. From a business standpoint, this is a brilliant move.

Apple has managed to capture the “magic” that inspires consumers to rush out and spend their hard earned dollars and package it up in a simple white box. In doing so, they are very much relevant today and have changed the way people look at digital music forever.

Sunday, November 19, 2006

No More Peanut Butter for Yahoo!

Executives today have to watch what they say more than ever before. Make a controversial statement and you better be prepared for that to become public within the next 30-60 minutes. Steve Ballmer reportedly has nightmares about every word he utters ending up on a blog.

Over at Yahoo, Brad Garlinghouse (an influentual SVP), has issued a scathing document that speaks to Yahoo's lack of a cohesive strategy. He had to have known this would become public knowledge, but at the same time this is comparable to airing your dirty laundry for everyone in the neighborhood to see (not really a good idea). The entire memo was reprinted by the Wall Street Journal and provides a glimpse at some of the internal struggles Yahoo is currently facing. This SVP is critical of Yahoo's desire "to do everything and be everything -- to everyone" and likens this approach to spreading peanut butter.

Garlinghouse nails a critical component that most corporate execs today avoid like the plague - accountability.

"I believe there are too many BU leaders who have gotten away with unacceptable results and worse -- unacceptable leadership. Too often they (we!) are the worst offenders of the problems outlined here. We must signal to both the employees and to our shareholders that we will hold these leaders (ourselves) accountable and implement change."

All companies face similar cultural problems as they grow and it appears that Yahoo is no exception. If Garlinghouse gets the opportunity to implement the changes he feels are critical to the companies continued success, it will be interesting to see what changes might occur at the highest levels.