Is your internet business plan stupid enough?

Without a doubt, one of the best written articles I've ever read on mybroadband.
 
When I first heard about Google I thought 'how can something this simple be so popular?'.
 
Pavan said:
Without a doubt, one of the best written articles I've ever read on mybroadband.
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Really? I thought it's one of Alistair's poorest articles so far. Google was extremely profitable from very early on with rapidly growing profits and its early investors would've known this before they went public (their idea was never 'stupid', because their main actual idea wasn't really to revolutionize 'search', as everyone thinks, but to revolutionize online advertising; they got early investment during the days when investment was easy to come by, and once their ACTUAL FINANCIAL numbers were demonstrated at being exceedingly excellent, it would've been almost a no-brainer for investors to put more money in, as they did --- how is it stupid to invest more in a very profitable fledgling business?). Twitter on the other hand is touted as a success because of its market cap, yet anyone who lived through the dot com bubble should know this is an incredibly stupid thing to say - Alistair especially should know better, market cap is meaningless especially in what is called bubble conditions - it's not even actually clear if Twitter is even making money yet, so too early to call. And GroupOn should die because they do dodgy things like lie in their advertising (the first time I clicked on one of their ads the claims in the ads turned out to be total BS, just a lie to 'hook' you into going through to the website), which is why I avoid them. And the fact that they're insolvent, well duh, there is a reason private companies finances are private and only those privy to the finances can say anything much about a company at any point in time.
 
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most successful business are founded on stupid or simple ideas. That's why when you hear a rich man recounting his beginning you always a have a thought in your mind that goes 'why didn't I think of that' coz you realise it was hopelessly simple.
 
I'm still not sure what the article is trying to say.
Tick said:
Really? I thought it's one of Alistair's poorest articles so far. Google was extremely profitable from very early on with rapidly growing profits and its early investors would've known this before they went public (their idea was never 'stupid', because their main actual idea wasn't really to revolutionize 'search', as everyone thinks, but to revolutionize online advertising; they got early investment during the days when investment was easy to come by, and once their ACTUAL FINANCIAL numbers were demonstrated at being exceedingly excellent, it would've been almost a no-brainer for investors to put more money in, as they did --- how is it stupid to invest more in a very profitable fledgling business?). Twitter on the other hand is touted as a success because of its market cap, yet anyone who lived through the dot com bubble should know this is an incredibly stupid thing to say - Alistair especially should know better, market cap is meaningless especially in what is called bubble conditions - it's not even actually clear if Twitter is even making money yet, so too early to call. And GroupOn should die because they do dodgy things like lie in their advertising (the first time I clicked on one of their ads the claims in the ads turned out to be total BS, just a lie to 'hook' you into going through to the website), which is why I avoid them. And the fact that they're insolvent, well duh, there is a reason private companies finances are private and only those privy to the finances can say anything much about a company at any point in time.
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What the article highlights is valid though, if you make a new popular service which has a simple yet clever business model, it is copied very, very fast. In fact i'd say unless you tie it with some complex service/IT dev function involving hardware resources someone else can't roll out and develop, you will be copied. If not by some Chinese company then by a larger US one if it is a very feasible idea.

Groupon, FourSquare etc were copied by both Facebook and Google(ok not 4sq infact 4sq came from google's projects with no real use i.e. latitude). Why did they fail to copy foursquare? ignored it and didn't roll out location services fast enough me thinks, groupon's idea was simple to replicate but then everyone did so which killed it.

The old adage of getting there 1st wins it no longer applies when the person coming 2nd has 1000x more resources to throw at it or competitors 2-999999 do so at a fraction of the cost :P
 
Twitter's not an even better example. "In 2006, the idea didn’t just seem foolish, it seemed downright stupid. Using the Web to broadcast 140-character-long snippets to people you don’t even know? Who would want to use that? How would it ever make any money? Five years later the Web buzzes with over 200 million tweets a day and Twitter is worth an estimated US$7bn."

It seemed foolish then and it still does, imo. I wouldn't want to compare Twitter to any business that actually sells a product, whether they're profitable at it or not. It really doesn't matter that you can push 200 million messages / day. It matters that you can make money pushing them. Twitter hasn't proved it can, so it's proved nothing more than that people will use a free service to broadcast messages.

We like to bash Groupon because it's an easy target. We think we can understand why it makes money... or why it doesn't. It's easy to see the competition. Twitter, not so much. Nobody understands their business model. Nobody wants to compete. That doesn't make it a good business. IMO quite the opposite.
 
Tick said:
Really? I thought it's one of Alistair's poorest articles so far. Google was extremely profitable from very early on with rapidly growing profits and its early investors would've known this before they went public (their idea was never 'stupid', because their main actual idea wasn't really to revolutionize 'search', as everyone thinks, but to revolutionize online advertising; they got early investment during the days when investment was easy to come by, and once their ACTUAL FINANCIAL numbers were demonstrated at being exceedingly excellent, it would've been almost a no-brainer for investors to put more money in, as they did --- how is it stupid to invest more in a very profitable fledgling business?). Twitter on the other hand is touted as a success because of its market cap, yet anyone who lived through the dot com bubble should know this is an incredibly stupid thing to say - Alistair especially should know better, market cap is meaningless especially in what is called bubble conditions - it's not even actually clear if Twitter is even making money yet, so too early to call. And GroupOn should die because they do dodgy things like lie in their advertising (the first time I clicked on one of their ads the claims in the ads turned out to be total BS, just a lie to 'hook' you into going through to the website), which is why I avoid them. And the fact that they're insolvent, well duh, there is a reason private companies finances are private and only those privy to the finances can say anything much about a company at any point in time.
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Actually the search engine was their biggest innovation. Granted they revolutionized online advertising too, but they laboured long and hard to figure out a way to make money from the search engine. It was only when they managed to develop an advertising model to monetize their searches that they started making real money at all.

Get a copy of 'Download: The True Story of the Internet' it tells the whole story of how Google started.
 
It's a bit OT but I've been wondering about how the next Dot Com Crash will happen.

I have a feeling that the first collapse was precipitated by a massive failure to generate cash flow from online versions of traditional businesses (stores, mostly). It was pretty immediate and isolated, because these businesses were waiting for customers who never turned up.

I suspect the second collapse will be different. It will be caused by the collapse of the online advertising "pyramid scheme".

There's quite a lot of cash flowing through online services now, but it's mostly coming from advertising... and who's advertising? Mostly other online services. They got their initial capital from investors, but at some point these services will need to generate real cash from operations, or investors will pull out and they will close. That means they will stop advertising. When they stop advertising, other services which depended on ad revenue will see their cash flow evaporate, and will fail in turn. This could lead to a truly massive chain reaction of failure.

At the very top of that pyramid is Google, who is almost entirely dependent on advertising from everyone else in the pyramid. I'm expecting interesting times ahead.
 
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