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By Raghu Kakarala on Thursday, May 3rd, 2007
Yesterday was either a watershed day in user generated content or at least an important footnote. The popular user-ranked news website Digg received a “takedown” notice after an article on how to crack the HD-DVD encryption specification was displayed on their website. After receiving the notice the company’s CEO decided to remove the article and suspend the user accounts of those who attempted to repost the article. He explained his motivation to do so as being for the rule of law and not as a direct attack against the Digg user community.
The community disagreed and proceeded to en mass post numerous articles with the encryption specification which by that point had already appeared at numerous locations across the web. The result was that the users had essentially hijacked the website from having any other news appear. When faced with either deleting a significant number of its users from the system or allowing the posting of the content in violation of the “takedown” notice the founder of Digg, Kevin Rose, decided to cast his vote with his users. To the possible detriment of Digg, he has decided to fight any legal action that occurs even if it means the end of the company.
So was the action of yesterday one of democracy on the web or one of mob rule? I am not a fan of overly restrictive copyright rules, and the information was freely available on the internet at numerous locations other than Digg, but Kevin Rose had no choice. Once you cast your company as a community that is primarily run by your users you have to accept that you live by the sword and die by the sword. Perhaps the users of Digg understand that, and are willing to see Digg die what they see as a noble death fighting for what they think is right. But Digg itself had no choice in the end, in the face of a swift and powerful user run protest it could either fight for its users or cancel all their accounts.
The possible repercussions of this on unmoderated user forums, discussion boards and other community based sites may start to be felt in the coming weeks. Or maybe the Digg user community is particularly strident. But its something to note, and could go down as a seminal event in user generated content on the web and who is responsible for the ensuing content.
Posted in Social Networking, Emerging Technology, User-Generated Content | 1 Comment »
By Raghu Kakarala on Monday, April 16th, 2007
I have come across two great examples recently where doing good is good business. I sense this is more than just a coincidence and is really a trend that should be monitored if not co-opted by other firms. The two things I came across are uniquely well conceived online marketing plans/ideas. So before I riff on the broader implications of the do-good trend let’s take a look at each example.
The first is from Microsoft and launched last month. It’s a new marketing plan involving their Live Messenger product. You may recall it by its previous name MSN Messenger. It is a popular and mature product that is free to use and ad supported. Many of you might not have noticed the rotating banner ads at the bottom of Live Messenger, they are easy to miss, but between pay per placement and pay per click they generate a modest profit. In a brilliant marketing move Microsoft has put a spin on the term “IM” and has created the “I’M Making a Difference” campaign. The essence of the campaign is that by choosing from one of the several worthy charities such as the Boys and Girls Club, Multiple Sclerosis Society, Sierra Club, etc and inserting a corresponding symbol at the end of your display name, Microsoft creates an ad revenue share with that charity.
So at no cost to you some of the revenue Microsoft receives for showing the ads that you are ignoring is sent to the charity you have chosen. An “i’m” symbol shows up at the end of your display name that shows that you are participating in the program. It is a brilliantly simple and well executed idea and should serve to increase users brand affinity for Live Messenger, which is a perfect complement to Microsoft chairman Bill Gates’s epic charitable efforts. The halo effect for the advertisers should not be ignored, perhaps leading down the road to higher placement fees which leads to more net dollars for everyone involved. An excellent, and rare, example of making something you are already doing help others. I encourage others who use Live Messenger (over 250 million have a version of it installed) to give it a try.
I came across the other “do good” idea a few weeks ago. The company is Green Dimes, and it has been up and running for the past six months. The company has built an internet based business model around junk mail. No, not the Viagra ads you receive in Outlook, but the junk mail you receive in your mailbox at home. They state that each year the equivalent of 100 million trees are used to create the junk mail we come home to every day and promptly throw in the trash. They act as a well connected intermediary to several “Do Not Mail” lists and let you customize which junk mail you actually want to receive. In a nice marketing twist they plant a number of trees on your behalf. Even their 1 year plan plants 12 trees. They keep a running tracker on their home page of how many trees they have saved/planted and how many pounds of junk mail they have stopped from being delivered. It’s a well conceived business that is venture backed and, to use the classic marketing phrase, “makes a great gift”. Several catalog dependent companies such as Mrs. Fields cookies have noticed a growing number of opt out requests coming from Green Dimes asking for recipients to be taken off of the company’s bulk mailing list. A note to catalog marketers to think about perhaps integrating their email and snail mail preference centers into one area.
So, do two examples of businesses doing good business by doing good make a trend? Actually, there are many more examples, some of which you may know of and I have yet to come across. So, please comment away on this post if you know more good examples.
The broader trend I see is that, increasingly, customers want to see, or will want to see, everyday companies doing their part to be good citizens. Particularly for the younger generation of consumers, this may become a requirement to prove your brand’s credibility. Old line businesses such as with British Petroleum’s “Beyond Petroleum” campaign and Charlotte-based NUCOR Steel’s “It’s our nature” website stories have been well done. However, those two firms have much to prove as far as whether their intentions lead to credible actions. So keep an eye out on your competitors, they may be more green or charitable than you. Whether they are or not, it may well be time for you to take the initiative to position your brand as a leader in this area. And you might enjoy the monetary benefits while you help everyone else enjoy the more tangible benefits of your efforts.
Posted in General, Social Networking, Media, Viral Marketing, User-Generated Content | 3 Comments »
By Raghu Kakarala on Tuesday, February 20th, 2007
Last week the top internet retailers in the country convened at eTail 2007 to learn what their peers are doing, listen to vendor’s pitches of new products and services, and to commiserate about the state of their industry. In my post from the conference last week I had commented on the recent lack of innovation in online shopping. Over the last three years merchants have moved progressively towards what has become a fairly homogenous online user experience that caters to the same mode of browsing and transacting as each other’s websites. Imitation may be a form of flattery, but if form follows function, then in the case of online shopping, banality follows form.
Online shopping has in reality been reduced to online transacting. Seek this one thing, find that one thing, maybe compare prices, then check out. 1 + 1 = 1.1 = something less than the whole. The building of desire? The premise that shopping should be engaging? Maybe at next year’s eTail. Or the year after that. Or never. Maybe it’s time to accept the fact that this is the business of ONLINE shopping, and not online SHOPPING. Maybe it’s about the medium and not the act?
That’s what it seems like today. The onerous burdens of the internet retailer to streamline technology and operations, to market the site in search engines, to keep their heads above the latest calendar-driven buying surge have driven innovation to the back of the “to-do queue”. Innovation - isn’t that the job of the next technology vendor? A slightly faster search tool, a multivariate test platform, a 0.05% improvement guaranteed or your money back technology elixir. All fine and well. But what if the industry could look out further than this month’s results? What if they could rise above the day to day grind? What is missing? I say at a high level it’s a sense of fun.
Fun? Yes, Fun! Not laugh out loud entertainment, at least not for most types of products. But how about at least a sense of discovery, of desire, of something a level above the pablum of the competition? If there are three basic pillars of online retailing, they would be operational efficiency, marketing efficiency, and conversions. A few retailers have achieved an operational advantage over their competitors via technology, fulfillment processes, and scale. Some have achieved an advantage of driving qualified traffic to their websites through search engines and affiliates. But who has led in conversions? Ask most industry experts and they will point to conversion ratios in order to rate the winners. Click to Product to Cart to Checkout. Mission accomplished in their book. They will pepper that user with some email campaigns, a discount here and there and wait for them to come back. Maybe they will type in the URL this time and save the retailer $1.50 charge from Google.
But what if shoppers came to your site because they really wanted to? What if they experienced something unique, engaging, even dare we say it: fun? There are several ways to express this concept in different terms. What if shopping online was more social, more collaborative, more educational, more engaging? What if ONLINE shopping became online SHOPPING. Or what if someone threw caution, and e.e. cummings, to the wind and capitalized both words, “ONLINE SHOPPING”, and created something worth seeing, doing, and doing again?
I think something is coming to help make online shopping fun. It just isn’t coming from retailers. It’s coming from outsiders like social networks where products can be promoted by buyers’ peers. Its coming from magazine publishers who are going to attack with a vengence. They will not bog themselves down with operational concerns, they will not seek to compete in the traditional online marketing channels as internet retailers, they already have traffic, and they will build more through word of mouth and the nework affect. The good ones will get stronger and more powerful at a very quick pace. These sites will not hold inventory, they will not plow money into google keywords, they will send their qualified, engaged traffic to the online shopping sites, for a fee. Their margins will be in the mid double digits rather than the high single digits of transactional websites.
So when People Magazine realizes that their InStyle website should not look like this but should look like this then users will flock to the site. The magazine will be useful online. It’s already engaging to users offline. Conde Nast is beginning to get it and they have a bevy of content to expand this vision. Scripps gets it and has a powerful stable of multimedia content plays to bring to bear.
These are the companies that help build desire, that help create buzz, that engage their customers through their multiple channels of content. While online retailers are homogenizing their shopping experiences the here-to-fore dormant giants that help build desire, and the new age social networks that have created communities that spread desire are preparing to close in and take the high ground. The high ground of traffic and lead generation. And retail shops will pay, a lot, for that traffic and for those leads, and thereby label themselves as low margin impediments to purchases rather than the high ground of creating desire and providing true value.
It might take a couple of years for this to play out. But I see this as something that will play out. And major retailers with a sense of initiative (and budgets) have a tight window to decide on whether they will invest in content, features and partnerships to bring the “fun” back to shopping. Or resign themselves to being transaction vehicles with an ongoing operational focus.
Posted in User Experience, Social Networking, Emerging Technology, E-commerce, Web Design, Technology | 5 Comments »
By Raghu Kakarala on Wednesday, February 14th, 2007
I am attending the eTail 2007 conference this week. The first session of the day just wrapped and as I take a chance to go to the Starbucks in the lobby and hop online I have a chance to see the battle weary but happy faces of the ecommerce merchants around me. It’s Valentine’s day and for several of these merchants its the first chance to rest after the back to back to back holiday build up from Thanksgiving, to Christmas through today. Talking this morning with Mrs. Fields Cookies I see first hand the work that ecommerce merchants put in to fulfill their customers requests. Their busiest days were over this past weekend, both Friday and Monday in particular. Last minute shopping has always been popular, toss in shipping constraints and the fact most people shop on workdays from the office computer and an internet retailer can generally map out their busy days in advance. The cookie impresarios at Mrs. Fields mentioned that they see their peak volume generally between 11am and 2pm. The times around lunch makes the cookie hearts grow fonder it seems. Valentines day represents their second busiest time of year and today they can finally sit back and see how their cookies translated into dough.
As per the conference itself: The kickoff speech to this year’s conference was particularly relevent. I say that partly because it was a great presentation and partly because it echoed a recent post in our blog. Chris Anderson, the Editor in Chief of Wired Magazine explained that niches are the new mainstream and that retailers needed to adjust. I couldn’t agree more. Richer and more engaging content presented in new and compelling formats is vital for ecommerce merchants who want to seperate from the pack and get results. Stephanie Acker-Moy from Hewlett Packard followed that speech up with one about using content development to enhance the brand experience. By blending rich content and feeds together to present customers with fresh and compelling content a retailer, or any website for that matter, can stay relevent while also being able manage the new level of content effectively.
One overriding subtheme to this event, echoed in several conversations I had with other merchants is that the operational requirements of ecommerce are still overwhelming. There is the feeling that the day to day issues of updating content, dealing with logistical issues, taxes, returns, inventory, merchandising etc has sapped a lot of the creativity and joy from the long time ecommerce vendors. This has perhaps been the reason that ecommerce sites have mostly evolved to look the same, with little innovation the past few years. Its lulls like these - where innovation gets curtailed to deal with operational issues - that present opportunities and rewards to those who do something different. I think the ecommerce space has been in their current innovation lull for too long. I have some sense of where things are going next. For that you will have to wait for my eTail wrapup post but I would like to hear your thoughts on whether there has been a lull in innovation in ecommerce and what will shake things up in the coming year.
Posted in General, E-commerce | 3 Comments »
By Raghu Kakarala on Monday, February 12th, 2007
This past weekend’s SoCon07 event was a big success, with 100 people attending the Friday night dinner session and well over 200 people attending Saturday’s conference -held at Kennesaw State University. The Friday night dinner session consisted of table discussions moderated by some of Atlanta’s leading internet thought leaders, such as Jeff Haynie, Sanjay Parekh, Leonard Witt, and others. I had the pleasure of joining them as a table moderator for the discussion on “Building Online Communities”. It was a spirited discussion, not just on popular online communities such as MySpace and Facebook, but also what can be done in a closed environment such as within churches and businesses. There was an interesting social networking application that was created right here in Atlanta called Yaplet, that has some very interesting use cases in online shopping as well as general information sites. It creates a new niche in contextual chat that I think has some legs. Many thanks to Christina and Matthew Might for bringing their thoughts to bear on the discussion, as well as all the other attendees for taking the time to share their expertise and interests.
The Saturday event was kicked off by Leonard Witt and Sherry Heyl, and was then headlined by Chris Klaus whose past efforts in internet security helped put Atlanta technology companies on the map. Chris is now heading Kaneva which is doing some innovative work in creating a platform for virtual worlds. Like the “unconference” it was dubbed, discussions ranged from the esoteric to the mainstream. The main takeway for me from the event was that Atlanta’s internet economy is broad in terms of interests, and deep in talent. Many thanks to the people both in front of and behind the scenes who helped make this weekend a success.
Posted in General, Social Networking, Emerging Technology, User-Generated Content, Virtual Worlds | No Comments »
By Raghu Kakarala on Saturday, February 10th, 2007
Yahoo has continued its recent trend towards remaining relevant today and launched a BETA of a game changing service called Yahoo Pipes and the response from the early adopters has been so good that they had to shut down the service for the better part of the day to increase capacity. I will explain my take on the service shortly but first a quick overview of what the service aims to be as it evolves towards its 1.0 release.
Much of the web today is a hodge-podge of data mixed in with the visual representation of that data. Web pages look good and present value to users but do not interact easily with other web pages or services. There has been a movement towards making web content more structured and the ultimate goal for some visionaries like Tim Berners-Lee is the idea of the sematic web in which different types of content and services on the web can interact intelligently, and with a minimal amount of human intervention.
Standards such as RSS have helped free up some types of content into a structured and streamable format. This, combined with web services such as FLICKR, Google Maps and others offering SOAP and REST API formats have helped lead to the rash of mashups web users have been beneficiaries of over the past couple of years. While mashups have been relatively easy to create from a programmers perspective, they have not been easy to create as an internet savvy but non-technical end user. Yahoo Pipes aims to change that. Though it is named after UNIX pipelines, from where the Yahoo service gets its inspiration, the approachability of the service, with its visual assembly environment aims for a different crowd than the obscure and often obtuse command line interfaces of such UNIX stalwarts as vi and shell scripting. Pipes allows its users to visually connect the input and output nodes of different pre-built modules together to create mashups with significantly less effort than is currently required. Not that mashups are difficult to create, but now they have gone from requiring a little bit of a programmer’s time to requiring only the end users efforts. The output of the Pipes mashup is pushed out in RSS, RDF, JSON, or ATOM format so that it can then be reused again by someone or something else. Toss in a user content sharing on Pipes and suddenly every user can feel like a king.
My take on Yahoo Pipes after briefly being able to use the service is that it is a harbinger of the next stage of the democratization of data. By empowering users to mix RSS feeds, repurpose content, and define their own complex flows of data and services it helps bring power to the true users of the data. The marketing data, sales data, and financial data of an organization are controlled not by their respective departments but primarily by the technology department. This model will remain true for some time, but as elegant and powerful services such as Yahoo Pipes come into their own, and as the web continues to expose data feeds via standardized formats the end users will be able to expose, repurpose, blend, and consume the data in original and meaningful ways by themselves.
Great programmers will always be needed, and I believe they are the true artistic masters of our time. As great programmers create not just great applications and services, but great tools to allow the true end users to repurpose those applications and services we will all be better off. Web savvy end users want to stand on the shoulder of giants not wait in line for their IT department to respond to their requests. Just as programmers today sling code more efficiently using Rails instead of slogging through Assembler, non programmers are now being exposed to elegent and evolving services such as Yahoo Pipes to enable their own ideas and meet their own needs.
To be fair IBM announced an early stage approach towards end user created flows today in the form of QEDWiki - work on the name guys, but otherwise a great service as well. Marc Andreesen has built a platform over at Ning to allow for the easy creation of social networking sites. Yahoo Pipes is more generalized and likely to catch on versus those platforms. Tim O’Reilly calls Yahoo Pipes a milestone in the history of the internet. In my view its one of the biggest steps towards the democritization of data, de Tocquiville would blog relentlessly about this if he were alive today.
Posted in Emerging Technology, User-Generated Content, Technology | No Comments »
By Raghu Kakarala on Saturday, February 10th, 2007
I stumbled upon found an excellently produced video that summarizes what Web 2.0 is. It was created by Micheal Wesch at KSU - not Kennessaw State University where tonight and tomorrow the SoCon conference is taking place, but Kansas State University. Wesch is an Associate Professor of Anthropology there. I highly recommend this video below as being worthy of the next ~4+ minutes of your life.

I hope to see many of you at SoCon 2007 this weekend. It’s 2.0 networking in 1.5 days.
Posted in Social Networking, Video, User-Generated Content | 1 Comment »
By Raghu Kakarala on Wednesday, January 31st, 2007
I am headed out on the road in the coming weeks. Part of the upside, and downside, of keeping up with the interactive marketing industry is the travel to conferences such as the annual eTail conference out in the desert. Some great speakers and topics are lined up this year including a great session on the merging of social networking with ecommerce. There are also a slew of “new ideas” and “groundbreaking tactics” that will be discussed which caused me, an occasional contrarian when the mood strikes, to wax nostalgic on the subject of retailing. This helps me crystalize how I see the “future” of ecommerce, now that present day ecommerce has evolved into a mainstream activity.
Remember department stores? Sears and JCPenney’s ring a nostalgic bell for some of us, even while they continue to stay in business. Higbee’s, Polsky’s, and Marshall Field’s for some of us northerners have a special meaning if we are old enough to remember them. The Higbee’s in Public Square in Cleveland was the site of the opening scenes in A Christmas Story - ahhh good times. The good times didn’t last much longer for the department stores, as they soon saw crested their hill and began the descent to their nadir.
Multiple forces have caused them to diminish in importance over the years. Suburbanization played a part, with the rise of Target and Walmart and the continued displacement of their original customer base away from their existing stores. But specialization did the most damage, with shoppers seeking to buy items both large and small from companies that focused on one type of product. Such stores as Best Buy in electronics, Gap in clothing (remember when all it did was sell Levi’s?), Home Depot in tools, and so forth, found that many consumers wanted both more choice and a unique shopping experience for each type of item they shopped for.
The mainstreaming of ecommerce over the last ten years has continued to buffet the department stores; and they have found it difficult to match even their diminished real world market share online. Meanwhile nouveau department stores such as Amazon have become an effective, if not terribly profitable, purveyors of a range of goods online. Starting out as a vertical play in books and quickly expanding ever since, they have become a modern day department store without the Muzac and crowded parking lots. The Gap has spawned further offerings at their sister companies such as Banana Republic and Old Navy both offline and online. Despite this, there has been a proliferation of niche plays in ecommerce who have done quite well by being very good at one thing. Bluefly in fashion, Zappos in shoes and countless others have driven their revenues continuously higher as they continue to sharpen their operations to realize profits. Micro niches have sprouted that would be unsustainable in an offline format: want to buy a environmentally correct yard appliance? Try People Powered Machines; but not before checking to see if the product you want is cheaper at Clean Air Gardening.
So what is a modern day ecommerce merchant to do to stay relevent to an increasingly fractured customer base that wants an unique shopping experience? How does an Amazon or a Gap not cede the lucrative shoe market to the shoe market niche players for example? The answer is easy from the view of quantative analysis: play the same game as the niche players but with better capitalization, technology, and efficiencies of scale. Flog the capitalist principles that have always worked but with a hefty dose of marketing pandering charm tossed into the mix. Amazon and Gap have both started playing the micro niche game by taking on the Shoes.com and Zappos of the world with their own seemingly stand alone ecommerce stores. Ladies and Gentlemen please start spending your money at the near infinite choice of shoes and handbags at Endless.com - brought to you by your friends at Amazon. Can’t find what you want? Try your luck at Piper Lime - no it’s not that chic boutique around the corner with off-street parking, it’s a niche-of-a-niche, conveniently brought to you by the Gap. These stores can showcase the same or expanded content from their parent companies in an online store that dedicates itself to the specific types of shoppers who seek that content and selection. This trend should expand significantly as larger ecommerce players build out specialty front ends tied into their generalist and efficient back end operations.
Staying relevent and providing an increasingly personalized and unique shopping experience is the new name of the game. It’s the same game that department stores pioneered by assigning an area in their vast expanses to goods of a particular type. But as the ecommerce experience has become more mature, we are now in the age where specialties are perhaps best served by efficient corporate operations that are tuned to provide efficient fulfillment and processing, with the purchasing power only they can provide. The drums of efficient capitalism beat on and the trend should continue to manifest itself over the short to medium term. Consumers will always seek both value and convenience in proportionate amounts even while they are attracted to uniqueness. The new ecommerce environment seeks to create that combination in an unique yet efficient way.
The new new thing is to exploit multichannel and enterprise channel size to outprice the smaller sites in search engine keyword bidding and other advertising, while still sustaining higher margins. These dollars can then be invested to add even more professional level content, imagery, and shopping tools and to expand out new micro niches as necessary. A new niche is only a cool domain name and an interactive agency RFP away once the sub-sub-market is discovered that needs to be addressed. Now if only these niche of niches’s could come up with better names than Piper Lime. For that we should blame the marketers, not the quant jocks who continue to devine the micro niches to exploit next.
Posted in General | 2 Comments »
By Raghu Kakarala on Wednesday, January 31st, 2007
User generated content is a great thing. It unshackles the creative bounds of the general population by easing the creation and dissemination of creative expression. It’s a wonderful trend that has created countless citizen journalists, comedians, stuntmen, and made for a non-stop 24/7/365 platform for a quasi “America’s Funniest Home Video’s” in the form of YouTube. User generated content is also at the heart of Second Life. After launching in 1999, Linden Labs, the company behind Second Life, tried a few business approaches to virtual worlds before seizing on the user creation angle where users could not only create content but posess it and transact in a virtual economy. As with all user generated content, your experience in Second Life will vary with the quality of the content, and it’s not all that great at times. We don’t watch “America’s Funniest Home Videos” all the time on TV, if we did we would miss out on content like “Lost”, “The Simpsons”, and “Seinfeld” that both tastes great and is more filling at the same time.
Professional content will almost always trump user generated content in terms of production values and star talent. While it does annoy us at times with yet another bad Freddy Prinze movie, it does provide us with content creators like MTV, Disney and Nickelodeon. So what if those firms immersed their immense creative talents in virtual worlds, transforming some of their legacy original content and new initiatives into virtual worlds more attuned to their target audiences. It has already begun, and it marks the beggining of the next stage of Virtual Worlds online.
MTV, not necessarily a bastion of great original programming, has recently taken their “The O.C.” knockoff “Laguna Beach” virtual with the aptly named “Virtual Laguna Beach”. Where the world is prepopulated with professional content and more importantly context. The originality or quality of it is for someone other than me to judge, but as long as the real world viewers of “Laguna Beach” think that show has merit, they will have a strong likelyhood of finding value in the virtual version - audience immersion or the willful suspension of disbelief taken to new level. More interesting and much more compelling (trust me on this) are the virtual worlds and immersive experiences just launched by Nickelodeon and Disney. Nicktropolis launched today and is filled with the world of Nickelodeon, from its characters to its brand promise - and it’s safe for kids! The new Disney.com is relaunching in the coming days and will have an immersive experience with a massively multiplayer online game (MMOG) based on the Pirates of the Carribean and social networking where Disney characters and storylines intersect with the users. User content has its place, but at times the experts can create an experience and a setting that is timeless and fulfilling in a way that a handycam and the 19 year old skateboarder next door jumping off his roof cannot. Content from people we trust to create content we care about and content that is safe for wider audiences. Inevitably there will be virtual worlds created solely for adult oriented interests. And more power to them, as they will have the exact type of content the people who interact with them will expect to see.
As new as virtual worlds seem, they have existed all along, but we have had to buy tickets to places like Disneyworld to immerse ourselves in them. Second Life will continue to thrive with their virutal economy and the massive randomness that makes user generated content compelling in its own right. But some experts in virtual worlds have entered the picture and there is a ready audience of current fans of their creative efforts that will see and enjoy the experience.
Posted in User-Generated Content, Virtual Worlds | No Comments »
By Raghu Kakarala on Thursday, January 18th, 2007
Netflix took the next step to living up to its name by starting to allow select customers to download movies online rather than receive them via mail - net flix indeed. Netflix innovated the movie rental space when it began operations in 1997 with its service that allowed subscribers to select movies online and receive them by mail with an indefinate return date. Like any innovator it has faced the classic problem of being copied and sometimes bettered by well financed rivals such as WalMart and Blockbuster.
It’s the innovators dilemma that has seen two waves transpire in the last decade since Netflix debuted. Netflix’s service disrupted the business model of Blockbuster, and now the coming of on-demand digital downloads available by Apple’s iTV, Microsoft’s XBox 360, and the delivery networks such as Comcast has disrupted the mail only portion of Netflix’s core business. Netflix is going it alone at this point and is investing $40 million to get the service off the ground. If any aspect of this move is bold, that is the one that should stand out. There are several key components to the much anticipated ability to view the movie you want to watch when you want to watch it.
- The front end interface to select the movie needs to be enticing - a check in Netflix’s column, their queue and recommendation interface is good and always attempting to get better.
- The ease of getting the movie off the computer and onto the tv - a big check in the column for the XBOX and the cable companies with their ubiquitous set top boxes.
- The network needs to be robust - an advantage for the cable companies with their closed systems but broadband speeds continue to increase which will shrink this advantage over time.
- The selection of movies needs to be vast - an interesting note in Netflix’s gradual rollout of this new service is that only 1000 of the 70,000+ movies Netflix offers today will be available for download - a function of the complicated technology behind on demand downloads.
So they have a tough road ahead of them, but a fighters chance to be successful. You always know a good fighter has a few more punches left in them regardless of the challenger they are facing. Perhaps the toughest dilemma they face is that after spending $40 million dollars to rollout their new service they will have the same revenue from existing customers as they had before. They will need to find a way to get the cost of a digital download below the price of the US Postal Service. That will be a fun fight to watch - on demand that is.
Posted in General | 3 Comments »
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