March 1, 2009

Links too delicious

These links are too good to only go to my Delicious-feed. It is a mix of posts about (online publisher) strategy, online advertising, online games and startups. Good reads all of them.

Bronte Media: 300m page views/mo; about $6k in revenue. "That in turn leads advertisers to wonder why if the large publisher is giving 70%+ of its inventory on a volume basis to ad networks, it should pay 10-20x the price to directly deal with the sales force. And hence we have the conundrum that has been facing the online advertising industry for the last 10 years (not just now, but through thick and thin)." A large web site should avoid having the majority of its ad inventory sold by ad networks (high-end sales representation firms are a different matter).

Reaction Wheel: If the Neighbor's Grass Always Looks Greener, Rip out Your Lawn and Plant Wildflowers. "Certainly I understand the draw of coming at an old problem with an outsider's insights and another discipline's techniques; trying something that has not been tried, the new tool. But if you've not been in an industry, you probably don't understand how it and its ecosystem work and why past efforts to change it have failed. How can you address fundamentally complex issues that you don't even know about?" Deep understanding of one's industry is a big advantage. You can deal with the specifics and not the general.

Umair Haque: The Smart Growth Manifesto. "21st century economies will be powered by smart growth. Not all growth is created equal. Some kinds of growth are more valuable than others. Where dumb growth is unsustainable, unfair, and brittle, smart growth is sustainable, equitable, and resilient." Food for thought.

Judith Wolst: The space between the notes. "Most of us spend most of our work time focusing on the "things" that make up our product or service: the features, the words, the sounds, the icons, the buttons, the graphics, the content and so on. We try to define and control every aspect of the user’s experience. Every moment of the user's experience. But what if the non-things–the space between the things–is just if not more important?" True on many levels.

Futuristic Play: Which startup's collapse will end the Web 2.0 era?."But I’ll say that I’m still quote worried, because of my belief that the worst has yet to come. There is a large group of 2004-2007 self-described Web 2.0 companies which haven’t hit bottom yet, and I'd like to discuss this possibility in this post. I hope this blog will spawn off useful discussions for entrepreneurs thinking about where we are in the boom-bust cycle." In the end companies need customers.

Equity Kicker: Ten reasons why startups fail. "They run out of money." Read and contemplate if you run or work in a startup.

Fortune: How Facebook is taking over our lives. "President Obama used it to get elected. Dell will recruit new hires with it. Microsoft's new operating system borrows from it. No question, Facebook has friends in high places. Can CEO Mark Zuckerberg make those connections pay off?" Good cover feature article. Facebook is growing incredibly fast and now is truly one of the big Internet companies in usage.

Lessons Learned: Work in small batches. "It turns out that there are tremendous benefits from working with a batch size radically smaller than traditional practice suggests. In my experience, a few hours of coding is enough to produce a viable batch and is worth checking in and deploying. Similar results apply in product management, design, testing, and even operations. Normally I focus on the techniques you need to reduce batch size, like continuous integration. Today, I want to talk about the reasons smaller batches are better. This is actually a hard case to make, because most of the benefits of small batches are counter-intuitive." Small is good, but not always possible.

Above the Crowd: Perfect Online Video Advertising Model: Choose Your Advertiser. "Enough with the caveats — here is the idea. For online premium and unique VOD content, content owners should let the user pick one of a group (say 4-9) of sponsors for the show they are about to watch. With online video this would be easy. As you launch the show, it gives you an array of thumbnail choices for sponsorship. The great thing here is that all parties win. The consumer is happier with the advertising because its relevant to something on their mind, and they are more likely to pay attention when it "interrupts" the programming. The advertisers gets a user that has qualified themselves as being interested in the product or category which is huge. Known intent is massive. And lastly, the content owner will likely end up with ad rates higher than they have ever seen previously." The trick will be to combine gathering intent and provide scale to advertisers. Which is by no means easy to do.

Virtual Economy Research Network: Korean online game portals report record-breaking sales in 2008. "When it comes to the factors of the success of Korean online game portals last year, two things should be mentioned: Fully mature online game market environment, established micro-transaction models. For the past 8 years, Korean online game portals have made hard efforts to cultivate the market and user communities. Recently, their efforts have started to pay off. Now that each of them has tens of millions of subscribers, they easily make money from the huge amount of users having high loyalty. Actually, they don’t even need to spend money for marketing their new games. When they release a new game, their game users give the word to spread the information of the game each other in their own community." The three companies mentioned sells games online in Korea for about $750 million per year with nice profit margins. Online games still have room to grow in Europe and the U.S.

T=Machine: Jagex: Runescape is not Freemium / Free-to-play,pay-for-stuff. "RuneScape is different from all other MMOs in that the free game has an epic amount of content (we’d estimate over 2,000 hours worth to get all your skills up to 99 and complete all the quests) and isn't merely a demo for the members' version. If anything, we see the members' version as an expansion pack for those that really love the game". Good to understand when thinking about strategy. Xiha Life lowers prices and revenue goes up. "And Xiha's case would seem to prove this; since making the change (lowering prices from €20-30 to $7-10) the average revenue Xiha gets from this source has gone above the average. Which can only mean that lower prices actually broaden the "market" and more consumers than ever before are buying the products." Lowering prices to unlock a larger market can work, but if the lower price doesn't bring significantly more paying customers, the reduction in ARPU will hurt revenue and profit directly.

Futuristic Play: Warren Buffett's bio "The Snowball" and lessons for startups. "Yet at the same time that this froth exists, there’s an undeniable fact that enduring, profitable, standalone businesses have still taken 5-8 years to build. Yes, it’s very cheap to get started and run some experiments, but to scale into a huge business, it takes real time and capital. Take a look at Facebook, for example, which clearly still has many years on it before it cracks the code on its business model and scales into something huge. Even Google took from 1996/7 to 2004 to get big - can you really do it faster?" It takes at least five years to build a company, as I've said before (but can't find the link right now).

Michael Kinsley: You Can’t Sell News by the Slice . "Newspaper readers have never paid for the content (words and photos). What they have paid for is the paper that content is printed on. A week of The Washington Post weighs about eight pounds and costs $1.81 for new subscribers, home-delivered. With newsprint (that’s the paper, not the ink) costing around $750 a metric ton, or 34 cents a pound, Post subscribers are getting almost a dollar's worth of paper free every week — not to mention the ink, the delivery, etc. The Times is more svelte and more expensive." Saying that readers never have paid for content is at best sloppy thinking in combination with the search for a good one-liner and at worst just stupid. When I've subscribed to newspapers I've paid for the content, the advertisers' paid for paper and delivery... Or slightly more seriously said: just because the size of one type of revenue is large enough to cover certain costs, it doesn't mean that customers are paying for those costs specifically. That is sloppy populism that should be avoided by people trying to run or comment on a business with a dual revenue model (paid for by users and advertisers.


Taylor Davidson said...

An interesting mix of thoughts from a variety of sources, creative and rational thinkers about industries, behaviours and standards. The constant thread: change.

Henrik Torstensson said...

Thanks for the comment Taylor and for pointing out the common theme I didn't quite see. /Henrik