One-person bands drown out small companies on the net
But now that I've paid the necessary homage to the glorious future of the internet, let me explain why I think internet businesses will have a much tougher time than the pundits tell you.
Let's compare the internet to the restaurant business. Restaurants are hot. And they are a great way to make value out of very little. You take a little bit of food; then you add content (intellectual property) and labor (intellectual process). In the restaurant business, this usually consists of recipes, design (how to make things look good on the plate and putting together the decor of the restaurant) and advertising. The "labor" is in the kitchen (cooking up the recipes) and, more importantly, in the dining room and at the bar - serving the customers, greeting them, making them feel welcome, recognizing them and remembering their preferences (where they like to sit, the potato-leek soup that's not on the menu but is available to special customers).
From very little, intellectual property and intellectual process can create a viable business. It's the same on the internet: an editorial person who specializes in, say, hockey or divorce law, can work with an advertising salesperson and bring on a with-it graphic artist to create an on-line business.
Everyone wants to invest in both restaurants and internet businesses; they are the next big thing. You can invite your friends to visit and have a good time yourself. All over London, chefs and maitre d's and restaurant marketing consultants decide to go into business for themselves. Likewise, all over the world, writers and artists and marketers are starting their own web sites.
A well-known pastry chef announces plans to open a pastry restaurant, and venture capitalists flock to fund him. A soup chef opens several soup stores. Commercial laundries announce plans to specialize in tablecloths, napkins and waitperson uniforms, and join in the excitement. And on the internet side, journalists start on-line publications, ad salesmen start marketing companies, and graphic artists specialize in web-site design to serve all these start-ups. Funding is easy to find because it's obvious that restaurants and web sites are the key to success in the next millennium - well, the next decade anyway.
Of course, a couple of years later it's obvious that no one can eat many more than three meals a day or look at more than a few web sites. And management isn't easy. The pastry chef, brilliant at crusts and fillings, fails when it comes to balancing the books and managing the staff. The soup wizard can't handle the soup chefs under him. The journalist can't attract a large enough audience to sell ads. The graphic artist is rude to so many customers that they find another supplier.
Moreover, observers and would-be millionaires alike are not noticing all the other people who are trying to get into the same business, and worse, others offering equivalent services for free - or what I call home cooking.
Interestingly, in this regard the internet and the food business are going in opposite directions. Restaurants and mass-produced food have turned the process of feeding people into a commercial business. Meanwhile, the internet is turning the business of content creation back into a cottage industry, where many people do it for themselves and their (virtual) neighbors. By contrast, home cooking, such as it is, mostly serves families and close friends. Yes, I walked into an airport lounge the other day and found a plateful of home-baked biscuits, clearly made by an attendant who was doing it for love rather than compensation. But that's the exception nowadays. On the internet, it is normal.
Lately, whenever I give a talk I ask the audience the following question: "How many of you devote a substantial amount of your resources, whether personal time or money, to creating free content for the internet?" Of course, I depend on the individuals to define for themselves what "substantial" means, but the answer is always interesting. Usually, it is 20-25% of the audience. That's an awful lot of home cooking.
It means that all those people and businesses eagerly creating commercial content for the internet are competing not only with those free efforts, but also that many people in their potential audiences are spending their time creating their own content for pleasure rather than - gasp! - consuming the commercial stuff put out by companies and advertisers.
Similar to the restaurant business, there will probably be a strong showing from market giants, such as McDonalds, that will make money through sheer mass.
But there will be very few successful medium-sized sites. Instead, there will be a profusion of people hoping to grow large with money from venture capitalists, and people who do it for sheer pleasure. Overall, the business will probably be unprofitable, but people will continue to enter either because they don't care - they enjoy creating and sharing content - or they hope to hit the jackpot.
If you are serious about money, you should probably have something to sell. In the food business, that means attaching yourself to a hotel, a store, a manufacturing plant or perhaps a fee-charging tourist attraction. Likewise, a web site needs to be attached to something offering chargeable, whether it is a store with off-price jeans, an editorial service with compelling news (which generally takes more than a single journalist), or a community that targets a specific industry. It's easy to be a one-person band on the internet, but it's not easy to be a 20-person company and compete with all those one-person bands.
Let's compare the internet to the restaurant business. Restaurants are hot. And they are a great way to make value out of very little. You take a little bit of food; then you add content (intellectual property) and labor (intellectual process). In the restaurant business, this usually consists of recipes, design (how to make things look good on the plate and putting together the decor of the restaurant) and advertising. The "labor" is in the kitchen (cooking up the recipes) and, more importantly, in the dining room and at the bar - serving the customers, greeting them, making them feel welcome, recognizing them and remembering their preferences (where they like to sit, the potato-leek soup that's not on the menu but is available to special customers).
From very little, intellectual property and intellectual process can create a viable business. It's the same on the internet: an editorial person who specializes in, say, hockey or divorce law, can work with an advertising salesperson and bring on a with-it graphic artist to create an on-line business.
Everyone wants to invest in both restaurants and internet businesses; they are the next big thing. You can invite your friends to visit and have a good time yourself. All over London, chefs and maitre d's and restaurant marketing consultants decide to go into business for themselves. Likewise, all over the world, writers and artists and marketers are starting their own web sites.
A well-known pastry chef announces plans to open a pastry restaurant, and venture capitalists flock to fund him. A soup chef opens several soup stores. Commercial laundries announce plans to specialize in tablecloths, napkins and waitperson uniforms, and join in the excitement. And on the internet side, journalists start on-line publications, ad salesmen start marketing companies, and graphic artists specialize in web-site design to serve all these start-ups. Funding is easy to find because it's obvious that restaurants and web sites are the key to success in the next millennium - well, the next decade anyway.
Of course, a couple of years later it's obvious that no one can eat many more than three meals a day or look at more than a few web sites. And management isn't easy. The pastry chef, brilliant at crusts and fillings, fails when it comes to balancing the books and managing the staff. The soup wizard can't handle the soup chefs under him. The journalist can't attract a large enough audience to sell ads. The graphic artist is rude to so many customers that they find another supplier.
Moreover, observers and would-be millionaires alike are not noticing all the other people who are trying to get into the same business, and worse, others offering equivalent services for free - or what I call home cooking.
Interestingly, in this regard the internet and the food business are going in opposite directions. Restaurants and mass-produced food have turned the process of feeding people into a commercial business. Meanwhile, the internet is turning the business of content creation back into a cottage industry, where many people do it for themselves and their (virtual) neighbors. By contrast, home cooking, such as it is, mostly serves families and close friends. Yes, I walked into an airport lounge the other day and found a plateful of home-baked biscuits, clearly made by an attendant who was doing it for love rather than compensation. But that's the exception nowadays. On the internet, it is normal.
Lately, whenever I give a talk I ask the audience the following question: "How many of you devote a substantial amount of your resources, whether personal time or money, to creating free content for the internet?" Of course, I depend on the individuals to define for themselves what "substantial" means, but the answer is always interesting. Usually, it is 20-25% of the audience. That's an awful lot of home cooking.
It means that all those people and businesses eagerly creating commercial content for the internet are competing not only with those free efforts, but also that many people in their potential audiences are spending their time creating their own content for pleasure rather than - gasp! - consuming the commercial stuff put out by companies and advertisers.
Similar to the restaurant business, there will probably be a strong showing from market giants, such as McDonalds, that will make money through sheer mass.
But there will be very few successful medium-sized sites. Instead, there will be a profusion of people hoping to grow large with money from venture capitalists, and people who do it for sheer pleasure. Overall, the business will probably be unprofitable, but people will continue to enter either because they don't care - they enjoy creating and sharing content - or they hope to hit the jackpot.
If you are serious about money, you should probably have something to sell. In the food business, that means attaching yourself to a hotel, a store, a manufacturing plant or perhaps a fee-charging tourist attraction. Likewise, a web site needs to be attached to something offering chargeable, whether it is a store with off-price jeans, an editorial service with compelling news (which generally takes more than a single journalist), or a community that targets a specific industry. It's easy to be a one-person band on the internet, but it's not easy to be a 20-person company and compete with all those one-person bands.
