Masterclass - the business of blogging

Last week, we had the first 'live' session at our 'managing tech startups' class. We had Julio Alonso talk about bootstrapping, the attention economy and the importance of analytics in the attention economy.

JULIO ALONSO and WEBLOGS SL

A brief bio. Long story short, in 2005, Julio left a successful consulting career to start Weblogs SL, a privately owned co. running 40+ vertical blogs in Spain and Brazil. He's doing quite OK, and for the last two years, he's been featured in El Mundo's list of the 25 most influential people on the internet in Spain.

SO WHAT'S SPECIAL ABOUT IT: BOOTSTRAPPING

Personally, the most interesting bit about his story is the part about bootstrapping and making it a self-financing venture. Partly, it was an attempt to avoid the excesses of the crazy internet bubble that burst not so long ago. Partly, it was a goal to remain EBITDA positive, every single year, even if it came at the cost of slower growth. But I think the biggest factor was this idea of being in it for the long haul, not just to make a quick buck (which is what VCs want). This takes a lot of guts, and self belief.

THRIVING IN THE ATTENTION ECONOMY : STICKING TO THEIR ROOTS

Weblogs is sustained by advertising revenue. And advertisers pay for ads shown to readers when the content of the blog is relevant to the ad. So the more the content, and the more the readers, the more the revenue. Simple enough?

Maybe not that simple. A key asset and differentiator for Weblogs is their regular and knowledgeable reader-base. You can't mess around with these people by taking them for granted and bombarding them with ads, or even worse, ads irrelevant to what they're reading. The balance between commercializing the content and retaining the reader's attention is a fine one.

Weblogs' policy has been to stay true to their roots, prioritize content over ads, and where possible, enmesh the content and the ads together. Julio talked about a pretty interesting idea 'content going into advertisements', as opposed to 'advertisement going into content', which is the norm. They did this by embedding their (pre-existing content) recipes into an ad campaign they conceptualized for a food chain.

Their superior (i.e. more relevant) content is what'll ultimately keep them safe from the new threat posed by content-farms. Moreover, this is where Weblogs' bootstrapping comes into the picture in a business sense: they are free from any investor pressure to maximize revenue by plastering ads all over the place, or to increase page-views by directing the creative bloggers to "follow" a trend.

ANALYTICS:

One thing Weblogs could do better is to capitalize on their prime asset, their loyal reader-base. With their drilled-down analytics, they can charge advertisers a premium fee for ads shown to their loyal readers, as against a standard fee for ads shown to the one-time users.

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Net Neutrality Neutered ?

In all this hullabaloo over the Google-Verizon proposal,there are a lot of grey areas...
One good point stands out. No company can pay an ISP to prioritize it's traffic at the expense of a rival.
That, I think, pretty much retains the core idea of Net Neutrality.

Then why is there a reluctance on one's part to say it's cool?
Why is there a nagging suspicion that this proposal will do us no good?
Why is there so much skepticism around the deal?
There are reasons good enough to justify this ...

For one, the bargaining power rests with the ISPs when it comes to dealing with the smaller content providers. No good can come of it.
These smaller content providers will be able to cut deals with some ISPs, not with all.
Now, imagine one ISP has a deal with one of the bandwidth-hogs, and you get high-speed access to it at home. Now you travel to another place, and the ISP there doesn't allow high-speed access to this service, since it doesn't have a deal with the content provider. So you can access a website at full service levels with one ISP in one place, but not with another ISP in another place. What total rot!! The very essence of today's evolution is that the internet is the same wherever you go.

You can kiss the idea of a 'cloud' goodbye if this happens.

Tech. enthusiasts aside, the marketing departments won't be too happy with this development. They're targeting their customers and spending money on advertising on the right website, with all the segmentation, profiling etc. Now, some ISP comes along and blocks access to the website. A good proportion of the advertising expense would just go down the drain. Not good !!

Even if an ISP doesn't block access altogether to these bandwidth-hogs, if they just provide access to the content but at much lower (public) speeds, that's just not good enough. It'll still be a retrograde step.

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Putting your money where your mouth is

Saw an article in the day's FT, on Flattr. Boy, I like the idea of this thing...


The basic concept is really simple, you can reward the creators of content that you like, by crediting any amount to them. As little as 1 cent, as much as your pocket (rather, your mood) allows.

What appeals to me is this -First, the user has total freedom - 'like' whatever you want, pay whatever amount you want. The only restriction is that you register with a minimum of Eur 2, per month. Not much. You'll hardly feel it. Second, for someone who's creating really good content out there, even the 1 cent contributions can add up !! And finally, for those of us who come across something really cool, it's a nice way of showing appreciation. This says you really like it. Not like the stupid Facebook 'Like' button (some of the things that people like.... don't get me started ) !!

I know, the obvious thing, why pay the creator when he/she has knowingly put up the content for free? I don't know!! But the fact is that we aren't always logical. I've often felt so relieved at finding the right figures/analysis while searching for data for reports in the MBA, I wouldn't mind crediting 5-10 cents to the content creator, say 'you're a lifesaver, dude !!'.

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Foursquare - $20 M raised in VC funding

Foursquare, the location-based social networking site that we discussed in class in the beginning of the course, has just raised $20 Million in Venture Capital funding from the VC fund Andreessen Horowitz.

Not bad, eh?

Looks like there are good times ahead for the people behind FourSquare!! Marc Adreessen (the Netscape founder) is counting on a rapid growth in the smartphone market to justify his firm's investment in Foursquare. Facebook and Google (Google Latitude) are reportedly working on location-based social networking as well.

PS: This is what I had to say in an analysis on Foursquare's business model.

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Tesco - Scoring Points using IT ?

Retailing is a volume game. Shave off a fraction of the cost here, target marketing better there, and it all adds up. Tesco anyone? 'Every little helps', indeed.

In the beginning, Tesco was playing catch-up with M&S. Then, Tesco launched the Clubcard, a loyalty card that entitled customers swiped to earn points at the time of purchase, and could redeem to get discounts later. Sainsbury's dismissed this as just a glorified, electronic version of Tesco's Green shield stamps. They went wrong, big time!

Sainsbury's considered IT as a cost. Nothing more. Tesco went further, used IT as a game-changer, and became the #1 retailer in UK just a year after the launch. Guess who did they oust from the numero-uno position? Sainsburys!

So just how did this IT/marketing project give Tesco an edge over Sainsbury, M&S and the others?

Until now, it wasn't possible for retailers to know which goods were being purchased by which customer segment. Sure, they knew how fast goods were sold, the volumes, the individual bills/invoices etc., but it was all anonymous.

Now, Tesco could analyse the purchasing patterns of different categories of individuals. They could identify the stuff that students bought, as against the stuff that working wives bought. What did they do with this information?
* Cut down on TV advertising. They slotted customers into various segments, and then started focused campaigns at these segments.
* Align their promotion strategy specifically to the items that regular customers bought. This ensured that promotions benefited their regular customers more than customers who only shopped at Tesco during a promotion.
* Cut the number of items on which promotions were offered.

This huge amount of data, and all the analysis that offered them a competitive advantage over others was possible only because of some smart thinking (to come up with the idea), and excellent IT (for a robust implementation).
Just as Tesco had copied ideas in the beginning, others tried to copy this idea. However, Tesco's IT expertise in the implementation of the Clubcard idea was superior.

So yes, Tesco had an edge over their competitors because of IT!!

NewsFlash: Early this year, Sainsbury's Nectar loyalty program overtook Tesco's Clubcard. However, Tesco continues to remain the largest UK retailer.

PS: Scoring Points - pun intended, for once !

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Casa del Libro - a not-so-tough choice

Casa del Libro, at the height of the dot-com bubble, had long been established. They were figuring on entering the online market, and had bought the best and fastest (and the most expensive) servers and software. Then came the dot-com bust. Budget cuts. Downsizing. Lowered growth forecasts. And a tough choice.

Do they soldier on with the IT platform already acquired, or do they change course midstream and go in for something cheaper?

The context: They'd acquired top-of-the line systems - multiple Sun servers running a Unix variant, a high-end database, a search engine, firewalls, load-balancing.... Basically, they were prepared to handle a lot of traffic. Inevitably, this high performance came with high development and maintenance costs.

The alternative: They could go in for a cheaper solution, using Microsoft software running on HP servers. This would be much cheaper to develop and maintain at the cost lower performance.

The choice:I'd recommend going for the cheap solution !!
* It would be up and running much earlier.
* It was simpler. I can't stress the importance of the KISS funda enough !!
* Fine. The cheap platform wouldn't have been all that great. It wouldn't support a lot of traffic. But then, this shouldn't really have been a concern. The forecasts were lowered, right? Then why spend a lot of money for traffic that would probably be non-existent?
* There was talk of 'downsizing'. If you have fewer people, then you pick the solution that is easier to maintain.

By the time the website's traffic had grown enough to justify the need for the high-end system, it would've already been out-of-date. It would make more sense to opt for the cheap(er) solution, grow the business while adapting and fine-tuning the processes and business model according to their learning curve. Later, when ready, go for a high-end system. Sometime in the future. Not now.

Fast forward to the present: On a side note, would I recommend the same strategy had they been starting up now? NO. Absolutely not!!
Now, with cloud computing, and solutions like Salesforce.com, they could have actually got the website running 'fast + good + cheap' !!

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ERP - Change is the only constant !

ERP softwares are weird.
Lets say we have some ace ERP consultants, and they're going to foist an ERP solution (it's always a 'solution', never mere software !!) upon some unsuspecting co.

THE GOAL
To provide one single software for all departments within an enterprise, HR, Finance, Marketing, Sales, Manufacturing ... everything !! This should make life easier for all these departments.

OPTION # 1
If the co. decides to adapt the ERP as-is ('out-of-the-box' implementation of the industry's 'best practices', whatever that means), then the software will not really mirror the co.'s functioning. And the so-called 'best-practices' will probably not be what the co. wants.
End Result - the ERP implementation fails in it's goal !!

OPTION # 2
If the co. decides to customize the ERP to reflect their old practices, they end up paying a huge amount of money, spend a lot of time, just to do the same old things on a new software. Wait! Do people do that??
End Result - the ERP implementation fails in it's goal !!

OPTION # 3 (the middle path)
The co. uses specialized front-end systems, retaining their old practices. The ERP functions as a back-office system. The end users are happy, since their specialized systems can mimic actual industry practices better than some cookie-cutter approach suggested by the ERP chaps. And since the ERP is the common backbone/back-office system, the IT systems of all the departments can actually 'talk' to each other.
That's the best option, I hear?

Forget, for a second, the fact that the ERP chaps will make pots of money here, billing for all the integration. Here's the definition of an ERP as per CIO.com : 'ERP’s true ambition.... It attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments’ particular needs'

So, is the best form of an ERP implementation the one that actually defeats the very purpose of an ERP implementation? And potentially turns out to be the most expensive for the co. ?

Like I said, ERP softwares are weird.
There's no 'best option' !

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Could Have, Would Have, Should Have !

Consumer is king ?
Not quite. But we're getting there. Dell found out the hard way, way back in 2005. Jeff Jarvis, a journo-turned-blogger had a bad experience with Dell. He contacted Dell for customer service, and well, lets just say the bad experience got worse. So bad, that JJ took to periodic venting of his frustration on his blog, with a catchy 'Dell Hell' theme. Back then, it was a big deal, and it attracted widespread attention. Dell took a beating. Their stock price tanked. They got tonnes of negative publicity, and were finally forced into taking action.

To wit : Where did it all go wrong for Dell?
* Well, for starters, the laptop could've been better, ha ha
* They could've simply replaced his laptop, seeing what a ruckus he was creating (This was Rifai's first reaction as well !!)

OK, smart-alec options aside, the folks at Dell should've been paying more attention to what their disgruntled customers were saying. But that was too much to expect...Dell's policy vis-a-vis blogs/mails - 'Look, don't touch'. Sound advice for husbands partying around in Madrid; not-so-sound advice when it comes to customer service.

Escalation. Round 1. JJ threw another fit. The obvious thing would've been to nip the problem in the bud, and have some mid-level chap contact JJ and show the appropriate amount of concern. Again, Dell flunked.

Escalation. Round 2. The whole issue went through the roof, and was featured everywhere in the media. Finally, Dell noticed. It was at this point that JJ was refunded. An easier option would've been for Dell to co-opt him, offer to bring him on board as a consultant (only for a while) to work on improving their online customer feedback mechanism.
This particular cartoon is from JJ's blog. So he does have a sense of humour about the whole thing !

This would have had three benefits.
First, JJ would've been in a damned-if-you-do, damned-if-you-don't situation. He could've either accepted, and then however reluctantly, acting in fairness, have had to publicly acknowledge the fact that Dell was making some efforts. Or, he could've refused, and lost some credibility and been perceived as someone hell-bent only on armchair criticism, with no inclination to make things better.

Second, JJ, or someone else similarly positioned, could have made a real impact on Dell's sensitivity to customer opinion posted on the net.

Third, Dell would have the pulse of the customer. It's far easier to monitor what your customers are thinking, if they comment/blog about it on your own website. Damage control (step forward, mid-level chappie) is also easier if you know where to do it, and even easier if it's all in one place.

Note:
1. Dell did in fact do this stuff. But way too late for their own good.
2. The term 'Dell Hell' is a geeky inside joke on 'dll hell'. Not that you're expected to know.
3. I find it odd that Wikipedia has no page for Dell Hell !!

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Open up to open source !

In a post some time back, I'd written about disliking Windows Vista, and having chickened out of installing Ubuntu. With a weekend at hand, and no intentions of hitting the books, I had to do something....well, Windows got the boot (pun unintentional) !

The whole thing took just 10 minutes, starting to ending. Another 5 minutes to install Skype, a Flash plugin for watching Youtube and other streaming videos, and VLC player, and there I was, all set...
I spent more time thinking about this, than I did on the actual installation. I had a friends laptop running a Youtube demo installation while I was working on mine. That way, I knew that I was on the right track, and which option to select and so on.

Now, everything on my laptop is free. FREE.
I love it.
Open Source rocks.
May the source be with you ! (mea culpa, that's a really bad one !!)

Oh, did I mention that my 3 year old laptop feels blazing fast now?

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A victim of it's own success ?

Will Facebook end up being the victim of it's own success ? Methinks so.
Sure, there are tonnes of arguments to be made, either way.
For: the TINA factor i.e. Google's ineptitude at Social Networking (Orkut & Buzz).
Against: Privacy, changing habits, blah blah (it's a long list)
In my highly biased opinion, there are two things that will be the deciding factors:


Fact # 1: Facebook Connect is increasingly connecting websites to Facebook.This trend will only accelerate. More and more websites will link to websites. You'll be able to use your Facebook ID on these sites too. Liking or sharing information will be seamless across websites, making Facebook a kind of one-stop-shop for all your needs.
This alone, virtually guarantees a somewhat safe future for Facebook. It's not disappearing anytime soon, that's for sure !

Fact # 2: Facebook started off only for college kids, and now has anybody and everybody on it.
Facebook became so insanely popular with the rest of the world because it was popular with the kids in college, to begin with. They spread the word, as it were. Now, everybody and his Uncle are on Facebook. There's a lot of stuff going on with it. A lot of eyeballs are on Facebook. It's mainstream now !!
This might just turn off the younger lot. They'll come up with something newer, edgier, and much cooler. And if half the world is using a website to socialize, then that website just lost its 'coolness'. So I see more and more youngsters drifting away from Facebook. Where? God know! But, there's bound to be a steady decline.

Will it disappear? No. It'll probably become something that does fairly well, something that a lot of people use, but something that is no longer 'happening'. Staid and boring. It'll become Hotmail !!

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Don't be Evil

Don't be Evil, Google said.
Yet, it streams cookies onto your computer. Knows what you read, what videos you watch, what links you click, what keywords you search for. The works. It even came up with a browser that is great for browsing, yet mysteriously, doesn't provide any real support for blocking ads (that would be real stupid, wouldn't it, if advertising was your bread-and-butter).

But is Google really out to become 'big brother', or is it simply very good at a number of things, and has made the web experience so good for us that we choose to conduct the lion's share of our online activities through Google?

According to Google's data, each dollar spent on advertising leads to two dollars in revenue for the advertiser (directly, through Adwords), and about eight dollars in profit (direct Adwords clicks, plus non-sponsored, i.e. regular search results). Definitely not evil !!!
Note: It might be too good to be true, and it would be interesting to investigate the assumptions made.

Bringing Films and TV onboard
Not so long back, the major studios viewed Youtube as a menace. However, the cliche "If you can't beat 'em, then join 'em" worked, and we got music videos from Sony, UMG, and EMI (3 out of the big 4) on VEVO on Youtube. NBC, Fox and ABC set up HULU (as an alternative to Youtube that they could live with).

Now, the consumers have got better quality content, and the studios are happy about that too. They wouldn't want low-quality videos of their star artists being put up. The advertisers are happier, too. They get to run their ads against slick videos uploaded by the studios, not against some grainy stuff uploaded by a teenager. Google's happy to overcome it's copyright hassles.
Hulu's actually better than Youtube, in this regard, but is currently restricted to USA, and has a fraction of the user-base that Youtube does.
The next step for Google would be to ink deals to provide studio-authorised content. Already started !

In an innovative move, Youtube broadcast IPL games, real-time, and split the ad-revenue with the IPL. Now if this could be extended to the NBA, NFL, the Premier Leage, Champions League.... wuff ! Enough said !!

Innovation, The Labs and their Alumni
Google docs, Google reader, iGoogle, Google Maps, Google groups. Alumni from Google Labs, each of these. I love the innovations that come out of Google Labs. I've often tried them out, out of curiosity.

The cool thing is that many of these are the product of Google's famous 20% time off policy. No, the engineers don't take Friday's off; they just work on whatever brainwave they have. GMail, Google News and AdSense are products of this really cool policy. Reportedly, about 50% of new product launches come from this 20% policy. Boy, I'd have loved to have this flexibility when I used to churn code.

Certainly not evil !!

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Microsoft - A Cloudy future ahead ?

A disclaimer, right off the bat - I'm not a big fan of Microsoft. As an end-user, I use Chrome, not IE, Gmail a lot more than Hotmail, and would love to have Ubuntu on my laptop instead of Vista, but have chickened out.

The Good
Having said that, Microsoft must have done some things right over the years (duh, I could've said that without enrolling in IE Business School). For most of us, the first time we used a PC, we used Windows or DOS. Methinks, the best thing the boys in Redmond did was to simplify everything. I still remember the days when people took classes to learn how to operate computers! Now, everything is so intuitive.
The Bad
There's so much to say here! The highlights:-
* Windows is prone to crashing
* PCs kept getting faster, and Windows kept getting slower
* By the time Vista got around, people were fed up with the bloatware
The Ugly
There have been anti-trust issues. But these don't concern me directly as an end-user. So let's pass.

The arch-enemy - Google
More and more of your day-to-day work is going from your laptop onto the internet. Onto the cloud.
This makes them go head-to-head with Google in
* IE vs Chrome
* Hotmail vs Gmail
* MSN messenger vs Gtalk
* MS Office vs Google docs
* Bing vs Google
* Android vs Windows


The money, today?
Currently, Microsoft is getting the bulk of it's money from 2 blockbusters - the Windows operating systems (XP, Vista, 7) and Microsoft Office (2003, 2007, or the new 2010). From licenses.

The money, tomorrow?
In the near future, it'll be selling a service (a subscription). Microsoft will host these applications on their own servers, and the corporations will pay subscription on some sort of a per-user basis. Microsoft calls this Software + Service. The rest of the world, SaaS (software as a service) or Cloud Computing.
If you can buy milk, why go buy the cow? By the way, it's not just Software, you can get IT infrastructure too, as a service.

The new Office 2010 is already available, for free. It can be used to keep all your work 'online'. The cloud-wars have begun !

My $0.02 on the outlook (ok,bad pun!) for Microsoft
* I think the Microsoft of the future will be heavily reliant on the cloud.
* Google currently has a one-size-fits-all approach. All corporations get the same deal, be it a 10-man startup, or a biggie like Cap-Gemini. Microsoft has a more nuanced approach. They have one offering for the 10-man startup (where Microsoft hosts the apps on its servers), and another one for the big ones (can be hosted on the company's servers, and customised). This will be an initial advantage over Google, as their offerings are already tailored to enterprises scale implementations.
For Google, this is proving to be a bit of a challenge.
* And, I'm sticking my neck out here, but I think they're going to be fairly creative, and might finally shed their image of being 2'nd best in everything. If that's tough to imagine, then check out this amazing video clip - Vision 2019.

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Think before you click !

If you're one of the people spammed by this nonsense (so-called 'candid camera prank') on Facebook, then watch out.
You'd better be more careful the next time around !

You can check out further details here.

Methinks, one point to Jose Ramon, here !

PS: For the non-IMBA people reading this, Jose is a guy in my class who's spot on in saying that Facebook is a blight.

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Can't Beat 'em, then join 'em !

The news
Quite some time back, Oracle had acquired Sun. Now, in an attempt to catch up, Oracle's arch-rival, SAP, has acquired Sybase in a $5 billion deal. This was widely expected, since SAP was under pressure because of Oracle's stunning 'stack' strategy.
Sun had a hugely diversified product offering - the language used for many applications (Java) was theirs, the servers that a lot of companies used were theirs, the servers used an Operating system that was Sun's (Solaris) and the database that stored all the info could also have been from Sun.
The background
In early 2010, Sun was acquired by Oracle. Oracle had two hugely successful products - a suite of applications used by end-users in corporate offices, and the database that stored this info. After this merger, Oracle was in a position to offer a complete end-to-end solution to corporations, blocking out it's competitors, IBM and SAP, by offering better prices and the peace of mind that comes with dealing with only one vendor. In tech-speak, this concept is called a 'stack', with the software stacked upon an operating system, stacked upon a database, in turn stacked upon a server.
The competition
Oracle is currently the only one with a complete stack.IBM has everything except the strong ERP applications.SAP had only the application software. Now they've moved to acquire Sybase, a database.
Why the merger?
Now, it's only about half a year since Oracle acquired Sun and completed it's 'stack'. Definitely not enough time for the strategy to show any concrete results, either good or bad.
But SAP couldn't afford to wait and see if the strategy worked or not. They were placed in a sink-or-swim situation. They decided to swim. Will it work? The jury is still out on this one !!

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Show me the money !

At the IE IMBA program, there are some off-beat things that we do. None, so far, has been more off-beat than "Information Systems". So far, we've been discussing how Social media is changing lifestyles, and how companies are being affected (hey, it's a B-school !).

Sooner or later, every to-be-MBA goes "Show me the money !!". Take Twitter, for instance.

* Does it make any money?
* If yes, then how could it possibly do so?
* If not, then what's the point?

But if you're still at Twitter, then you've got some catching up to do. Meet Foursquare.

Foursquare reached the million user mark in half the time it took Twitter to do so.

Whats it about?

People can 'check in' to Foursquare from a specific location, say a restaurant. The more you do it, the more points you get. Visit a place (and check in from there) more than anybody else, and you become the 'mayor' of that place.

"What's in it for me, eh ?"

Maybe, the points don't mean a thing to you. They wouldn't, to me. But what if the bartender at the local Irish pub knew that I'm the 'mayor', and gave me a free beer each time (s)he saw me. That would definitely mean something ! Cheapskates, aren't we all !!




But why should the bartender do this for me?
* Well, customer loyalty, for starters. It's an easy way of identifying the regulars. And then keeping 'em regular!
* It's an easy-to-get word of mouth publicity for yourself
* the pub gets market-analytics info (age, sex, occupation etc. of the clientele, their timings at the pub/restaurant etc.). That helps the pub focus on the most profitable clients.
* the pub gets data on how effective it's marketing fundas have been

Fine, so the regular users are happy (a bit sozzled, too, with all the free beer !).
The bartender at the pub is happy. Just a few discounts(unavoidable anyway, but more targeted now), and more business in return.

But is that all ? Something's missing here !

Foursquare is still not making money !!
That's not what the to-be-MBA wants !
Show me the money !!

Raking it in with highly localised advertising
This is where the user helps Foursquare. It's not legal for advertisers to obtain your whereabouts based on your phone transmissions. So, Foursquare gets you to advertise your presence. This information is made available to advertisers.

You go to a gym, register your presence there, and lo, you get an SMS "Tired after a workout? There's a cold iced-tea and salad waiting just 2 minutes from you, at so-and-so location."

Creepy? For sure !

Invasion of your privacy? No. You let them know where you are.
Effective Local Marketing? Absolutely !

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