NIN gets (even more) creative…

Yesterday, I saw on Digg that Nine Inch Nails had released a digital album called “Ghosts I-IV” for $5. So, I bought it.

However, I don’t think anyone realized how popular this album was going to be…

When I got home to download the tracks, the site had crashed from too many users. So, I had to wait until the morning to download the music (which took 45 minutes… ugh). Short story… the album is still not on my iPod.

As I was waiting for the album to download, I got a chance to look around the Nine Inch Nails web site, and I was impressed. Trent Reznor released this album with a Creative Commons license and encouraged people to remix the music. And, he created an area on the site for users to post the remixes.

This is a great strategy… not only any I spending more time on the NIN web site to hear these remixes, but I’m more engaged with the product (I hate to equate anything Trent creates to “product”, and I apologize profusely).

If I love a product and stay engaged with it, you can be pretty sure I’ll continue to spend money… not because I am forced to, but because I WANT to. Every company should hope they can find customers that enjoy giving them money.

P.S. – Here’s a great New York Times article on NIN’s innovative business model for “Ghost I-IV”.


"Cool" Just Isn’t Enough…

I recently read the following quote from a Washington Post blog about the Digital Music Forum in New York City:

“A member of the audience then posed an pointed question: Isn’t simply being cool the secret to success? Consider Apple, for example. Napster became popular because it was considered “cool.” Now iMeem is benefiting from its cool factor.”

My answer to this questions is no… in the digital world, you should focus on utility, and cool should be the outcome. What makes technology “cool” is getting cool people to use it. And, if the service has no utility, then cool won’t help you for very long.

Now, mind you, “cool people” in the technology world that use products like Apple/Napster/iMeem aren’t the same “cool people” that spend hundreds of dollars on vintage Nikes. Even though they aren’t the same, they do share a similar quality… they are leaders in their respective groups.

So, to make you product “cool”, you need to find what motives the leaders and develop products they want to use.

I’ve Never Seen a Deal Botched This Badly…

Check out this TechCrunch story regarding the End of Stage6. I thought the product was shut down because it was essentially a pirated movie web site… looks like I was wrong.

This is a fantastically well-written story by Michael Arrington on how to mismanage a business and cost investors a significant amount of value.

What’s also a shame is that the Divx Codec is a great product.

Why are t.v. ad rates still so high?

I was having a drink a few weeks ago with a couple of friends, and the conversation veered towards the Internet. I argued that Internet advertising was much more effective than traditional media (i.e. television) because:

1) at it’s best, online advertising is active, as opposed to passive,

2) customer have the ability to spread your message virally online (I use the term “viral” based on Seth Godin’s definition of word-of-mouth versus viral), and

3) you have more transparency tracking online channels.

This is nothing ground-breaking, but I got the following question from my friend:

“If this is true, why do company still pay more for television ads, or pay for t.v. ads at all?”

I didn’t have a good answer for him… I tried the “marketers use what they know” argument, but this did not sway my price-focused, economist buddy. However, I think that I have an economic concept that helps to make my point:

Path Dependence

In short, path dependence states that adoption of new technologies is subject to its own history. By nature, businesses are conservative and have trouble adapting new technologies. However, the one that learn to adapt succeed, and the ones that don’t fail.

Hopefully, this helps me win the argument with my friend. That said, I’m going to research more into how people/organizations/companies overcome path dependence, as I’m sure it will be valuable someday

Why Facebook is Overvalued…

Today, published an article called is Is Facebook the Next Google?. I have a simple answer to that question… no. Do I think they are worth the US$15B valuation? Definitely not.

Why do I think Facebook is overvalued and over-hyped? Because they choose to focus on advertising as their core revenue stream.

Let me get one thing straight… I love social networking and online communities. I use Facebook, MySpace, Wikipedia, YouTube, LinkedIn, Craigslist, Stockpickr, and many others. I currently work for a company that recently launched a online social networking platform that allows senior corporate executives to share solutions to common business challenges. I even helped to develop a hyper-localized social network called HolaNeighbor during Startup Weekend DC.

I like social networks because they bring like-minded people together to create and interact, and these networks provide an extremely effective way to build, find, and organize new content. Plus, social networks develop huge data assets that can be used by companies to mine for trends, develop new products or enhanced features, better understand target markets, etc.

Ultimately, the value of a social network lies in the content and data assets they create, not the ability to advertise to users.

Facebook or any other social network will never become as large as Google if it focuses on advertising because, by nature, social networks restrict the number of people it can reach. Right now, Facebook has about 50 million registered users. Since Facebook can only advertise to registered users, that means that they get, at most, 50 million potential customers (even though about half of its users are on Facebook in a given month).

On the other hand, you don’t have to be a registered user to take advantage of Google’s advertising. Heck, you don’t even have to be on Google’s web site or use their search engine. That gives Google a potential global market of over 1 billion people, with over 500 million unique visitors to its web site per month. Even if Facebook meets its growth projection of 300 million registered user, that still gives them only 150 million unique visitors… by no means small, way behind Google.

Can Facebook target advertising to users better than Google. Possibly, but I’m not sure. Right now, Facebook has more data about its users, but I’m not sure if all that data is 100% relevant when advertising to a user in the moment. Because Google’s ad strategy focuses on using your search strings as the data, it’s advertisements are more likely to be relevant to what you are thinking about in the moment. So, just because I put “soccer” as an interest on my Facebook profile, it does not mean that I want to buy a new pair of Adidas clients or buy tickets to a D.C. United game.

What if we could build a social network that was valuable to both users and non-users alike? Then, you wouldn’t need to limit your advertising to registered users, and you would be able to build a valuable data asset. Not a bad idea.

UPDATE: Fred Wilson blogged today about the diminishing economics of Facebook advertising.

This sums up my feelings on New York City pretty well…

Here is a quote from the blog of Scott Heiferman, CEO and Co-Founder of Meetup:

“New York is self-confident because it makes the TV commercials (who cares), it’s got Wall Street and hedge funds (no real value-creation), and Time Inc and Conde Nast are here (old farts). New York’s economy is made of increasingly irrelevant and/or unsustainable and/or uninteresting cash cows and cash machines.”

I grew up in a New York City suburb (Norwalk, Connecticut). Where I lived, everyone I knew thought that “The City” was the center of the universe. Most of the people I went to high school with attended college in the Northeast, migrated to New York after graduation, and would not consider living anywhere else.

I made the very unpopular decision to go to school in the South, in the fantastic city of Nashville, TN. Everyone thought I was crazy for not going to the Ivy League or another small New England college. Besides being incredibley ignorant, my friends made their decision to stay in NYC because they believe it runs the world. These people could not be more wrong.

Sometimes, I wish people in New York understood what both Scott and I know… because New York adds no real value to the economy (they buy and sell, instead of create), it has become bloated and increasingly irrelevant in the global business.

Besides, it is impossible to find any good pulled pork sandwiches.

Questions to think about when monetizing your new product/service

During DC Startup Weekend, I asked one of the seasoned entrepenuers in the room if there were any tools in the market to help people develop a revenue model that exploits a product’s unique attributes. He said “no”. So, I am taking a crack at developing some tools which help business developer create a revenue model or monetization strategy. Here’s what I’ve come up with so far:

1) What specific added value does this product give to your customer (i.e. the end user)?

2) Would the customer be willing to pay for that added value? If yes, how much would the added value be worth? If no, why not (you may have a dud product)?

3) If the answer to question 2 is “no” or “not enough to turn a good profit”, what differentiating value could you provide to a third party (advertisiers, etc.) who wants to access that customer?

Based on these questions, would you add?

Wow… did I find something I don’t like about Google?

Today in TechCrunch, I read a post by Duncan Riley on Google dropping EnjoyPerth out of its search index because the firm sells text links to other sites. Since Google’s search rankings depend on the number of places a web site is linked, selling text links would hurt Google’s ability to measure a web site’s relevance.

In the post, Riley brought up a good point:

Overall though an interesting question arises, not just for EnjoyPerth but for all of us: is it healthy that we are all so reliant on Google. Are we better off for Google’s domination? would we be better off with stronger competition?

As much as Google is a user-focused company (and I certainly believe it is), lack of competition will make you comfortable and lazy. If selling text links is good for the advertiser, publisher (i.e. bloggers), and the reader (you and me), wouldn’t a user-focused company like Google want to build its search algorithm to accommodate this?

My Experience at the Startup Weekend DC

I’m coming up to the end of Startup Weekend DC, and we’ve launched a new product: HolaNeighbor. Here’s the press release from our marketing guys:

October 26, 2007 –WASHINGTON, D.C.–, a Web site that allows communities of neighbors to connect with each other, has planned, built and deployed a complete and fully-functional product in only 54 hours. Executed by a group of seventy, many of which had just met on the first night of the event, this initiative unites tech and business talent across the DC-metro area in a way never attempted on such a scale.

In addition to connecting neighbors with each other, allows for communities to exchange information, share upcoming events, request services, and provide insights into the current state of the community, such as crime reports and neighborhood watch.

The success of DC Startup Weekend signifies more than just the launch of a product in a shortened timeline. It is a community building a community, capitalizing on the depth of resources available in such a media-rich environment and focusing its efforts to make the area more accessible to residents, businesses and organizations.

Startup Weekend

Founded in 2007 by Andrew Hyde, the weekend is a concept of a conference focusing on learning by creating. It is known for its quick decisions, ‘out of the box’ thinking, unique facilitation technique and letting the founders show what they can do. The program has already met with success in Boulder, Toronto, New York, Hamburg, Houston, West Lafayette, Boston and DC and is expanding to 10 other cities. These cities include San Francisco, Boston, DC, Atlanta, London, Dublin, West Lafayette, Chapel Hill, Austin, Portland, and Seattle with more cities signing up weekly.

This weekend, I spent most of my time on the business development team with three jobs: 1) researching facts and figures for the team (my “differentiating skill”), 2) developing the revenue model, and 3) writing the pitch presentation.

Needless to say, I’ve learned a great deal, but I come away from the weekend with 3 general lessons learned about building a new business:

  1. Consensus = knowing what battles to pick, and when to just shut up
  2. When developing a revenue model, look for the game-changing feature(s) no one else has, focus on it to identify the distinct value it provides, and monetize it by seeing how much someone is willing to pay for it
  3. You don’t need to be a software engineer to be valuable to a web startup

After this weekend, I also have the ability to monetize almost any web site and develop a VC pitch using my new presentation template 🙂 All in all, I don’t think I could have had a more valuable experience, and I’m glad to see that DC has the creative, idea-oriented community I’ve been hoping to find.

By the end of the weekend, I should have helped to found a new company.

This weekend, I am participating in an event called the Startup Weekend DC. Here’s the explanation of the concept from the organization’s homepage:

Have you ever wondered
what a group of highly talented and motivated people could accomplish in a weekend? Could they start a company from concept to completion?

StartupWeekend answers that question and more. A unique three-day experience, StartupWeekend brings the best and brightest people together in a local office space to select the concept, break into teams, and develop the product, marketing and revenue model.

Occurring in cities across the world, StartupWeekend is the new way to allow your local entrepreneurial community to come together and incubate a company from concept to completion in just three days.

I heard about StartupWeekend about a month ago when I was reading the blog called Silicon Alley Insider. They wrote about the New York City session, which was unable to start a company by the end of the weekend. I hope that we will be a little more successful.

After the weekend, I will write a follow-up post to describe my experience and (fingers-crossed) the company I helped to found.