Resources consumed:
Video: Will Twitter Ever Make Money? Twitter CEO Evan Williams Responds (sort of)
Video: Disrupters: eCommerce Presentations by Charlie Kim of Next Jump, Inc.; Jen Beckman of 20X200; and Tebecca Thomsen of Alice.com
I first started with the article centering on taxonomy of internet commerce and found the following quote most prescient when thinking about their main idea: “The native Internet culture has adapted to this imaginary Internet space, which is by definition abundant. Information - the predominant property or commodity - is abundant and largely free. So the native Internet economy is based not on scarcity but on abundance, this is the primary difference between the Internet economy and the real-world.” We all know from general theories of economics that the rule of scarcity drives things like supply and demand and that is the reason that diamonds are more expensive then say, rubies, since one is much more scarce than the other. Not that the internet changes the availability of raw materials or finished goods available to the consumer, but I found the idea of the abundance of information to be a staggering thought that I had not really considered on a fundamental level.
The video on Twitter was enlightening considering my last post concerning the monetization of internet companies. I think that the Professors titled the video well when they alluded to Williams “sort of” answering the question posed very directly to him about how the company will make revenue. I read about these companies all the time that are in the news, are truly groundbreaking in regard to their service or business model but if there was for some reason a temporary vacuum of venture capital, would simply not exist. They can raise money in multiple rounds of VC to keep the employees paid and the lights on but it is a bit baffling that companies like Twitter and Facebook (in the case of FB living up to its monetization potential given its user base) are unable to be successful cash flow machines given their virtually limitless customer base. Every type of person I know is on Facebook and that seems like a great advantage over say, a Wal-mart or Neiman Marcus that attracts only a certain segment of any population. I thought the host of the video was simply asking what a lot of people are wondering with regard to a high profile company like Twitter and it seems even the CEO in the best position to spin an answer, any answer, about summed up his feelings with a statement that Twitter cares about revenue, but not as long as VC funding continues to prop them up. My final thought on this subject is how traditional stocks pay out dividends and conduct splits to maintain more even valuation but the newest type of IT stocks don’t normally pay out dividends or conduct splits and the investor that buys in is rewarded in theory with a faster future growth model than a traditional blue chip. I always find it interesting in that case to study the IT bubble of the 90s as well as note the joke of the “hot IT stock” that turns out to decimate an unwitting investor. Are there parallels to the current social networking problem of monetization from an investor’s standpoint?
I really liked the entrepreneurial San Francisco video featuring the CEO’s and senior members of small e-commerce start ups since I feel like each person that presented had a concrete understanding of how the business would make money, and how each model had a competitive advantage over the traditional model. As a future entrepreneur I am always on the lookout for good advice for avoiding mistakes made along the way so I enjoyed the Next Jump CEO’s take on less is more, which we had studied for Operations Management in regards to overwhelming the customer with too many choices, simply to show off the capability of a computer system. I remember how we had studied how grocery stores went off the deep end for a while stocking too many SKU’s and actually adversely affecting sales since customer’s couldn’t make a choice.
Some key lessons learned, looking for more!
I am convinced your purposeful perspective of someone who is anticipating starting a business serves you well. It always seems to enhance learning when it has near-term relevance.
ReplyDeleteI have entertained some of the same amazement that you allude to in your commentary about how these companies make money. I would add to a couple of your observations: first, have you noticed how many of the prominent internet companies seem to subscribe to the idea popularity is the key to success? They seem to subscribe to a line of reasoning that says, "Let's generate traffic--the more the better. We'll find a way to make money later. Popularity inevitably leads to profitability." In some cases they have trouble closing the loop--popularity doesn't inherently lead to profitability.
The other observation that I grapple with is the ultimate role that advertising can play as the source of revenue for these various online ventures. Can advertising deliver enough revenues to sustain all of the operations that seek ad dollars? Time will tell.
Your blog posts are insightful and thought provoking!