> I hate to say this, but I suspect that the web is going to lead
> to a vast homogenizing and centralizing of business.
>
> [...]
>
> It's going to kill the mom-and-pop (or two dudes and a Pentium)
> web sites. If they can't get their legal hands on original,
> unique content, they'll get wiped out.
you need to look at the differences between commodity markets
and specialty markets.
commodities are things which are basically the same, regardless
of brand. you used McDonalds as an example, but the commodity
greaseburger market is bigger than that one company. yes,
there are minor differences in the ways McDonalds, Burger King,
Hardees, et al. reprocess soybeans and gristle, but the overall
product is more or less the same regardless of what brand you
choose.
players in a commodity market survive by taking advantage of two
things:
1: economy of scale. if you buy meat in 100-ton lots, the
cost per pound is probably a tenth of what you'll find in a
grocery store. the same is true for buns, condiments, and
everything else that goes into a burger. that means McDonalds
can sell a burger for less than it would cost a civilian to
buy the components, and still make a profit.
2: market segmentation. commodities do tend to homogenize,
but if they get to the point where they're absolutely uniform,
your brand is worthless. take a look at the basic, no-frills,
hamburger offered by each of the major chains, and you'll see
nothing that makes one product more attractive than another.
that's why all the advertising concentrates on specialized
products like the Big Mac and Whopper, which are close to the
baseline, but still distinct enough to acquire a following.
consumers tend not to experiment with commodity products, they
just pick something they like and stick with it. therefore,
McDonalds works to keep the Big Mac different from the Whopper,
but still identifiable as a branded product.
both strategies are based on the principle that the biggest fish
in the pond will eventually win. several large fish can
coexist in the same pond, as long as none of them can get big
enough to swallow each other, but a little fish doesn't have a
chance in hell. commodity markets are no place for a small
player, and that's that.
on the other hand, the fact that commodity markets exist doesn't
mean that all markets can be reduced to commodities. there are
a lot of things out there that can't be homogenized, and anyone
trying to play in those markets using commodity techniques will
get smeared.
the auto market has the clearest example of the difference that
i know of. new cars are a commodity.. it doesn't matter where
you get your 1998 VW Beetle, because the only difference will be
the dealer's sticker on the back bumper. used cars, on the
other hand, are a specialty market. if i pull up 30 different
listings for 1968 VW Beetles, all at exactly the same price, i'm
still looking at 30 different products. i'm going to want to
look at each one individually, kick the tires, and bench-press
the engine a couple times before i decide which one i'll buy.
a commodity service, like Microsoft's online auto site (i've
worked very hard to forget the name, so don't ask), can kick the
collective tuckus of other players in that market. auto
dealerships know that, and are currently in a state of panic
trying to find a way to survive. but Microsoft doesn't stand a
chance in the used car market.. they can show me listings for 30
different Love Bugs, but they can't afford to bring me, and
every other prospective buyer, face to face with all 30 cars in
the hopes that i'll actually buy one.
in specialty markets, scale is a liability. the overhead stays
proportional to the size of your inventory, and also to the size
of your customer base. it costs a lot more to show 10 products
to 10 customers than it does to show 2 products to 2 customers.
even if i make a sale to each of those 10 customers, i still
only have a 10% hit rate. i have to absorb the cost of the 9
failed showings in each sale. the smaller version has a 50%
hit rate, and i only have to absorb the cost of 1 failed showing
in each sale.
the trick of making it as a small shop on the 'net is to find a
market where you're doing something the big guys can't afford to
do in scale. that puts your brand in competition with other
brands that offer the same service, which means other companies
at roughly your own scale.. not the behemoths. you don't have
to compete with Micrsoft's advertising budget, just the one of
the guy on the other side of town.
if you want to make it as a small shop online, invest in
infrastructure, internal communications, and training your staff
to do business. follow a strategy of upskilling your staff
positions rather than downskilling them, and make sure you can
delegate responsibility to people without getting burned. make
sure everyone is familiar with today's front-edge technologies
(everybody knows databases are important, but how many of us are
really *good* at SQL?), and make sure you have people exploring
the technologies that look like they're coming but haven't hit
primary adoption yet (XML/CSS is a potent mix, but the bandwagon
is still probably 5 years down the road).
shoot for projects being run by early adopters. they pay crap,
and are headaches in general, but they give you a chance to get
your moves down before the main herd decides they have to adopt
or die. the money comes during the early phases of primary
adoption, at which point you have a reputation (aka: brand) for
being able to deliver whatever the latest doohickey is. ride
the front edge of the curve, then abandon the market once the
big guys start turning it into a commodity. use the capital
you've gained to support your next batch of early adoption
projects, and pay the bills by taking projects in known fields
that are just a little too specialized to be strict commodity
jobs. two or three passes through the loop, and you'll have a
nice, solid reputation as a visionary.
.. and then i expect you to cite me as a reference in your first
book. ;-)
mike stone <[EMAIL PROTECTED]> 'net geek..
been there, done that, have network, will travel.
